32
571
1933
S
37
Haitong International Finance Holdings Limited
1,000,000,000
2026 2,800,000,000 3.20
84429
6837 600837
1
37.39A
2023 4 26
2023 5 10
37
2023 5 19
*
2
2023 4 26
2023 5 10
3
IMPORTANT NOTICE
NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES OR TO ANY
U.S. PERSON OR ANY PERSON ACTING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON (AS
DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT OF 1993, AS AMENDED (THE
“SECURITIES ACT”)).
IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached offering circular (the “Offering Circular”).
You are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the Offering Circular. In accessing the Offering Circular,
you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from the Issuer
or the Guarantor (each as defined in the Offering Circular) or from the Arrangers and/or the Dealers (each as defined in the Offering Circular) as a result of such access.
In order to review the Offering Circular or make an investment decision with respect to the securities, you must be located outside the United States and not be a U.S. person
or acting for the account or benefit of a U.S. person.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS
UNLAWFUL TO DO SO.
THE SECURITIES AND THE GUARANTEE EACH DESCRIBED IN THE OFFERING CIRCULAR HAVE NOT BEEN, AND WILL NOT BE, REGISTERED
UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE
SECURITIES MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY WITHIN THE UNITED STATES, OR TO OR FOR THE ACCOUNT OR
BENEFIT OF U.S. PERSONS, OR IN THE CASE OF BEARER NOTES, DELIVERED WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE
STATE OR LOCAL SECURITIES LAWS. THE OFFERING IS MADE SOLELY IN OFFSHORE TRANSACTIONS PURSUANT TO THE SECURITIES ACT.
Confirmation of Your Representation: The Offering Circular is being sent to you at your request and by accepting the e-mail and accessing the Offering Circular, you shall
be deemed to represent to the Issuer, the Guarantor, the Arrangers and the Dealers that (1) you are not in the United States and are not a U.S. person nor acting for the account
or benefit of a U.S. person and, to the extent you purchase the securities described in the Offering Circular, you will be doing so pursuant to Regulation S under the Securities
Act; (2) the e-mail address that you gave us and to which this e-mail has been delivered is not located in the United States, its territories or possessions; and (3) you consent
to delivery of the Offering Circular and any amendments or supplements thereto by electronic transmission.
You are reminded that you have accessed the Offering Circular on the basis that you are a person into whose possession the Offering Circular may be lawfully delivered
in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver or forward this document, electronically or
otherwise, to any other person. If you have gained access to this transmission contrary to the foregoing restrictions, you are not allowed to purchase any of the securities
described in the Offering Circular.
The Offering Circular has been made available to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during
the process of transmission and consequently none of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee (as defined in the Offering Circular) and the Agents
(as defined in the Offering Circular) or any of their respective directors, officers, employees, representatives, agents, affiliates or advisers or any person who controls any
of them accepts any liability or responsibility whatsoever in respect of any discrepancies between the document distributed to you in electronic format and the hard copy
version. The Dealers will provide a hard copy version to you upon request.
Restrictions: The attached Offering Circular or any Pricing Supplement is being furnished by the Issuer and the Guarantor and is exempted from registration under the
Securities Act solely for the purpose of enabling a prospective investor to consider purchasing the Notes under the Programme.
Except with respect to eligible investors in jurisdictions where such offer or invitation is permitted by law, nothing in this electronic transmission constitutes an offer or an
invitation by or on behalf of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents or any of their respective directors, officers, employees,
representatives, agents, affiliates or advisers or any person who controls any of them to subscribe for or purchase any of the securities described therein, and access has been
limited so that it shall not constitute in the United States or elsewhere a general solicitation or general advertising (as those terms are used in Regulation D under the Securities
Act) or directed selling efforts (within the meaning of Regulation S under the Securities Act). If a jurisdiction requires that the offering be made by a licensed broker or
dealer and any Dealer or any affiliate of such Dealer is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by such Dealer or such affiliate
on behalf of the Issuer in such jurisdiction.
Notice to capital market intermediaries and prospective investors pursuant to paragraph 21 of the Hong Kong SFC Code of Conduct – Important Notice to
Prospective Investors: Prospective investors should be aware that certain intermediaries in the context of certain offerings of Notes pursuant to this Programme (each such
offering, a “CMI Offering”), including certain Dealers, may be “capital market intermediaries” (the “CMIs”) subject to Paragraph 21 of the Code of Conduct for Persons
Licensed by or Registered with the Securities and Futures Commission (the “SFC Code”). This notice to prospective investors is a summary of certain obligations the SFC
Code imposes on such CMIs, which require the attention and cooperation of prospective investors. Certain CMIs may also be acting as “overall coordinators” (the “OCs”)
for a CMI Offering and are subject to additional requirements under the SFC Code. The application of these obligations will depend on the role(s) undertaken by the relevant
Dealer(s) in respect of each CMI Offering.
Prospective investors who are the directors, employees or major shareholders of the Issuer, the Guarantor, a CMI or its group companies would be considered under the SFC
Code as having an association (an “Association”) with the Issuer, the Guarantor, the CMI or the relevant group company. Prospective investors associated with the Issuer,
the Guarantor or any CMI (including its group companies) should specifically disclose this when placing an order for the relevant Notes and should disclose, at the same
time, if such orders may negatively impact the price discovery process in relation to the relevant CMI Offering. Prospective investors who do not disclose their Associations
are hereby deemed not to be so associated. Where prospective investors disclose their Associations but do not disclose that such order may negatively impact the price
discovery process in relation to the relevant CMI Offering, such order is hereby deemed not to negatively impact the price discovery process in relation to the relevant CMI
Offering.
Prospective investors should ensure, and by placing an order prospective investors are deemed to confirm, that orders placed are bona fide, are not inflated and do not
constitute duplicated orders (i.e. two or more corresponding or identical orders placed via two or more CMIs). A rebate may be offered by the Issuer to all private banks
for orders they place (other than in relation to Notes subscribed by such private banks as principal whereby it is deploying its own balance sheet for onward selling to
investors), payable upon closing of the relevant CMI Offering based on the principal amount of the Notes distributed by such private banks to investors. Private banks are
deemed to be placing an order on a principal basis unless they inform the CMIs otherwise. As a result, private banks placing an order on a principal basis (including those
deemed as placing an order as principal) will not be entitled to, and will not be paid, the rebate. Details of any such rebate will be set out in the applicable Pricing Supplement
or otherwise notified to prospective investors. If a prospective investor is an asset management arm affiliated with any relevant Dealer, such prospective investor should
indicate when placing an order if it is for a fund or portfolio where the relevant Dealer or its group company has more than 50% interest, in which case it will be classified
as a “proprietary order” and subject to appropriate handling by CMIs in accordance with the SFC Code and should disclose, at the same time, if such “proprietary order”
may negatively impact the price discovery process in relation to the relevant CMI Offering. Prospective investors who do not indicate this information when placing an order
are hereby deemed to confirm that their order is not a “proprietary order”. If a prospective investor is otherwise affiliated with any relevant Dealer, such that its order may
be considered to be a “proprietary order” (pursuant to the SFC Code), such prospective investor should indicate to the relevant Dealer when placing such order. Prospective
investors who do not indicate this information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”. Where prospective investors
disclose such information but do not disclose that such “proprietary order” may negatively impact the price discovery process in relation to the relevant CMI Offering, such
“proprietary order” is hereby deemed not to negatively impact the price discovery process in relation to the relevant CMI Offering.
Prospective investors should be aware that certain information may be disclosed by CMIs (including private banks) which is personal and/or confidential in nature to the
prospective investor. By placing an order, prospective investors are deemed to have understood and consented to the collection, disclosure, use and transfer of such
information by the relevant Dealers and/or any other third parties as may be required by the SFC Code, including to the Issuer, the Guarantor, any OCs, relevant regulators
and/or any other third parties as may be required by the SFC Code, it being understood and agreed that such information shall only be used for the purpose of complying
with the SFC Code, during the bookbuilding process for the relevant CMI Offering. Failure to provide such information may result in that order being rejected.
You are responsible for protecting against viruses and other destructive items. If you receive this document by e-mail, your use of this e-mail is at your own risk and
it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature.
Actions that You May Not Take: If you receive this document by e-mail, you should not reply by e-mail to this electronic transmission, and you may not purchase any
securities by doing so. Any reply e-mail communications, including those you generate by using the “Reply” function on your e-mail software, will be ignored or rejected.
YOU ACKNOWLEDGE THAT THE OFFERING CIRCULAR AND THE INFORMATION CONTAINED THEREIN ARE STRICTLY CONFIDENTIAL AND
INTENDED FOR YOU ONLY. YOU ARE NOT AUTHORISED TO AND YOU MAY NOT DELIVER OR FORWARD THE OFFERING CIRCULAR,
ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH OFFERING CIRCULAR IN ANY MANNER WHATSOEVER. ANY
FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE OFFERING CIRCULAR IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO
COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.
HAITONG INTERNATIONAL FINANCE HOLDINGS LIMITED
(incorporated with limited liability in the British Virgin Islands)
U.S.$1,000,000,000
Guaranteed Medium Term Note Programme
unconditionally and irrevocably guaranteed by
Haitong Securities Co., Ltd.
( )
(incorporated with limited liability in the People’s Republic of China)
Under the U.S.$1,000,000,000 Guaranteed Medium Term Note Programme described in this Offering Circular (the “Programme”), Haitong International Finance Holdings Limited (the “Issuer”), a company incorporated in the
British Virgin Islands with limited liability, subject to compliance with all relevant laws, regulations and directives, may from time to time issue medium term notes (the “Notes”) which will be unconditionally and irrevocably
guaranteed (the “Guarantee”) by Haitong Securities Co., Ltd. ( ) (the “Guarantor”), a company incorporated in the People’s Republic of China with limited liability. The Issuer is a wholly-owned indirect
subsidiary of the Guarantor. The aggregate principal amount of Notes outstanding will not at any time exceed U.S.$1,000,000,000 (or the equivalent in other currencies), subject to increase as further described in “Summary of
the Programme”.
With respect to each Tranche (as defined in “Summary of the Programme”) of Notes where the NDRC Administrative Measures (as defined below) are applicable, the Guarantor will file or cause to be filed with the National
Development and Reform Commission of the PRC or its local counterparts (the “NDRC”) the requisite information and documents in respect of the Notes, within the relevant prescribed timeframes after the relevant Issue Date
in accordance with the Administrative Measures for the Review and Registration of Medium- and Long-Term Foreign Debt of Enterprises ( ( 56 )) promulgated by
the NDRC and effective from 10 February 2023 (the “NDRC Administrative Measures”), and any implementation rules, reports, certificates, approvals or guidelines as issued by the NDRC from time to time (the “NDRC Filings”),
including but not limited to, the filing with the NDRC the requisite information and documents in respect of the issue of the Notes within ten PRC Business Days as defined in the Terms and Conditions of the Notes after the
relevant Issue Date (the “NDRC Post-issue Filing”).
Each Tranche of Notes issued under the Programme will have the benefit of a deed of guarantee dated on or about the relevant Issue Date (as defined in “Terms and Conditions of the Notes” (the “Terms and Conditions of the
Notes”)) (each, as amended, varied, restated, novated, supplemented or replaced from time to time, a “Deed of Guarantee”) entered into between the Guarantor and Citicorp International Limited as trustee (the “Trustee”)
substantially in the form attached to the Trust Deed (as defined in the Terms and Conditions of the Notes). The Guarantor will be required to file or cause to be filed with the State Administration of Foreign Exchange of the
PRC or its relevant local counterparts (“SAFE”) the relevant Deed of Guarantee within the prescribed timeframe after its execution in accordance with the Provisions on the Foreign Exchange Administration of Cross-Border
Guarantees ( ) promulgated by SAFE on 12 May 2014, which came into effect on 1 June 2014 (the “Cross-Border Security Registration”) following the issuance of each Tranche of the Notes. The Guarantor
shall use its best endeavours to complete the Cross-Border Security Registration and obtain a registration certificate from SAFE (or any other document evidencing the completion of registration issued by SAFE) on or before
the Registration Deadline (being 270 PRC Business Days after the relevant Issue Date) and shall comply with all applicable PRC laws and regulations in relation to the issue of each Tranche of the Notes and the relevant Guarantee.
Application has been made to The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) for the listing of the Programme within the 12-month period after the date of this Offering Circular on the Hong
Kong Stock Exchange by way of debt issues to professional investors (as defined in Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited) (“Professional Investors”) only.
This document is for distribution to Professional Investors only. Notice to Hong Kong investors: The Issuer and the Guarantor confirm that each Tranche of Notes issued under the Programme is intended for purchase
by Professional Investors only and the Programme and the Notes, to the extent that they are, to be listed on the Hong Kong Stock Exchange, will be listed on the Hong Kong Stock Exchange on that basis. Accordingly,
the Issuer and the Guarantor confirm that the Notes are not appropriate as an investment for retail investors in Hong Kong. Investors should carefully consider the risks involved.
The Hong Kong Stock Exchange has not reviewed the contents of this Offering Circular, other than to ensure that the prescribed form disclaimer and responsibility statements, and a statement limiting distribution
of this Offering Circular to Professional Investors only have been reproduced in this Offering Circular. Listing of the Programme and the Notes on the Hong Kong Stock Exchange is not to be taken as an indication
of the commercial merits or credit quality of the Programme, the Notes or the Issuer, the Guarantor or the Group, where applicable or quality of disclosure in this document. Hong Kong Exchanges and Clearing Limited
and the Hong Kong Stock Exchange take no responsibility for the contents of this Offering Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever
arising from or in reliance upon the whole or any part of the contents of this Offering Circular.
Notice of the aggregate principal amount of the Notes, interest (if any) payable in respect of the Notes, the issue price of the Notes and any other terms and conditions not contained herein which are applicable to each Tranche
of the Notes will be set out in a pricing supplement (the “Pricing Supplement”) which, with respect to Notes to be listed on the Hong Kong Stock Exchange, will be delivered to the Hong Kong Stock Exchange, on or before
the relevant Issue Date. The relevant Pricing Supplement in respect of the issue of any Notes will specify whether or not such Notes will be listed on the Hong Kong Stock Exchange or listed, traded or quoted on or by any other
competent authority, exchange or quotation system.
Notes may be issued in bearer or registered form. The Notes of each Series (as defined in “Summary of the Programme”) issued in bearer form (“Bearer Notes”) will be represented on issue by a temporary global note in bearer
form (each a “temporary Global Note”) or a permanent global note in bearer form (each a “permanent Global Note”) (collectively, the “Global Note”). Bearer Notes that are issued in compliance with rules in substantially
the same form as U.S. Treasury Regulations §1.163-5(c)(2)(i)(D) for purposes of Section 4701 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) (“TEFRA D”) must be initially represented by a temporary
Global Note and interests in a temporary Global Note will be exchangeable, in whole or in part, for interests in a permanent Global Note on or after the date 40 days after the relevant Issue Date (the “Exchange Date”), upon
certification as to non-U.S. beneficial ownership. Notes in registered form will be represented by registered certificates (each a “Certificate”), one Certificate being issued in respect of each Noteholder’s entire holding of Registered
Notes of one Series. The Notes of each Series in registered form will initially be represented by a global certificate (each a “Global Certificate”). Global Notes and Global Certificates may be deposited on the relevant Issue
Date (a) in the case of a Series intended to be cleared through Euroclear Bank S.A./N.V. (“Euroclear”) and/or Clearstream Banking S.A. (“Clearstream”), with a common depositary on behalf of Euroclear and/or Clearstream,
or with a sub-custodian for the Central Moneymarkets Unit Service (“CMU”) operated by the Hong Kong Monetary Authority (“HKMA”) and (b) in the case of a Series intended to be cleared through a clearing system other
than, or in addition to, Euroclear and/or Clearstream or CMU, or delivered outside a clearing system, as agreed between the Issuer, the Guarantor and the relevant Dealer. The provisions governing the exchange of interests in
Global Notes for other Global Notes and definitive Notes or Global Certificates for Certificates are described in “Summary of Provisions Relating to the Notes while in Global Form”.
The Notes and the Guarantee have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) or with any securities regulatory authority of any state of the United States
and may not be offered or sold or, in case of Bearer Notes, delivered, in the United States or to or for the account or benefit of, U.S. persons (as such term is defined in Regulation S under the Securities Act (the “Regulation
S”)) except pursuant to an exemption from the registration requirements of the Securities Act. There will be no public offer of securities in the United States. Bearer Notes are subject to U.S. tax law requirements. See “Subscription
and Sale”.
MiFID II product governance/target market – The Pricing Supplement in respect of any Notes may include a legend entitled “MiFID II Product Governance” which will outline the target market assessment in respect of the
Notes and which channels for distribution of the Notes are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the target market assessment; however,
a distributor subject to Directive 2014/65/EU (as amended, “MiFID II”) is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the target market assessment) and
determining appropriate distribution channels.
A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product Governance rules under EU Delegated Directive 2017/593 (the “MiFID Product Governance Rules”), any Dealer
subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise neither the Arrangers nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the MiFID Product Governance
Rules.
UK MiFIR product governance/target market – The Pricing Supplement in respect of any Notes may include a legend entitled “UK MiFIR Product Governance” which will outline the target market assessment in respect of
the Notes and which channels for distribution of the Notes are appropriate. Any distributor should take into consideration the target market assessment; however, a distributor subject to the FCA Handbook Product Intervention
and Product Governance Sourcebook (the “UK MiFIR Product Governance Rules”) is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the target market
assessment) and determining appropriate distribution channels.
A determination will be made in relation to each issue about whether, for the purpose of the UK MiFIR Product Governance Rules, any Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise
neither the Arrangers nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the UK MIFIR Product Governance Rules.
IMPORTANT – EEA RETAIL INVESTORS – If the Pricing Supplement in respect of any Notes includes a legend entitled “Prohibition of Sales to EEA Retail Investors”, the Notes are not intended to be offered, sold or otherwise
made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i)
a retail client as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify
as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended, the “Prospectus Regulation”). Consequently no key information
document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore
offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
IMPORTANT – UK RETAIL INVESTORS – If the Pricing Supplement in respect of any Notes includes a legend entitled “Prohibition of Sales to UK Retail Investors”, the Notes are not intended to be offered, sold or otherwise
made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client,
as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); (ii) a customer within the meaning of the provisions of
the Financial Services and Markets Act 2000 (“FSMA”) and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in
point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic
law by virtue of the EUWA. Consequently no key information document required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for offering or selling
the Notes or otherwise making them available to retail investors in the UK has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the UK may be unlawful under
the UK PRIIPs Regulation.
PRODUCT CLASSIFICATION PURSUANT TO SECTION 309B OF THE SECURITIES AND FUTURES ACT 2001 OF SINGAPORE – In connection with Section 309B of the Securities and Futures Act 2001 of Singapore
(the “SFA”) and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the “CMP Regulations 2018”), unless otherwise stated in the Pricing Supplement in respect of any Notes, all Notes to be
issued under the Programme shall be prescribed capital markets products (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment
Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
The Notes may be issued on a continuing basis to one or more of the Dealers specified under “Summary of the Programme” and any additional Dealer appointed under the Programme from time to time by the Issuer
and the Guarantor (each a “Dealer” and together the “Dealers”), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the “relevant Dealer” shall, in the case
of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Notes.
S&P Global Ratings (“S&P”) has assigned a corporate rating of “BBB” with a stable outlook to the Guarantor. The Programme is expected to be rated “BBB” by S&P. These ratings are only correct as at the date of this Offering
Circular. Tranches of Notes to be issued under the Programme may be rated or unrated. Where a Tranche of Notes is to be rated, such rating will not necessarily be the same as the ratings assigned to the Programme. The rating
does not constitute a recommendation to buy, sell or hold the Notes and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. A suspension, reduction or withdrawal of the rating assigned
to the Notes may adversely affect the market price of the Notes.
Investing in the Notes involves certain risks and may not be suitable for all investors. Investors should have sufficient knowledge and experience in financial and business matters to evaluate the information contained
in this Offering Circular and in the applicable Pricing Supplement and the merits and risks of investing in a particular issue of Notes in the context of their financial position and particular circumstances. Investors
also should have the financial capacity to bear the risks associated with an investment in Notes. Investors should not purchase Notes unless they understand and are able to bear risks associated with Notes. Prospective
investors should have regard to the factors described under the section entitled “Risk Factors” in this Offering Circular.
Arrangers and Dealers
Haitong International Haitong Bank
Offering Circular dated 26 April 2023
NOTICE TO INVESTORS
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE ISSUER, THE GUARANTOR OR ANY OF THEIR RESPECTIVE SUBSIDIARIES OR THAT THE
INFORMATION SET FORTH IN THIS OFFERING CIRCULAR IS CORRECT AS AT ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
This Offering Circular includes particulars given in compliance with the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to
the Issuer, the Guarantor and the Group. The Issuer and the Guarantor accept full responsibility for the accuracy
of the information contained in this Offering Circular and confirm, having made all reasonable enquiries, that
to the best of their knowledge and belief there are no other facts the omission of which would make any statement
herein misleading.
Listing of the Programme or the Notes on the Hong Kong Stock Exchange is not to be taken as an indication of
the merits of the Issuer, the Guarantor or the Notes. In making an investment decision, investors must rely on
their own examination of the Issuer, the Guarantor and the terms of the offering, including the merits and risks
involved. Please see “Risk Factors” for a discussion of certain factors to be considered in connection with an
investment in the Notes. Each Tranche (as defined in “Summary of the Programme”) of Notes will be issued on
the terms set out herein under “Terms and Conditions of the Notes” as amended and/or supplemented by a Pricing
Supplement. This Offering Circular must be read and construed together with any amendments or supplements
hereto and with any information incorporated by reference herein (see “Information Incorporated by Reference
and Financial Information”) and, in relation to any Tranche of Notes, must be read and construed together with
the relevant Pricing Supplement. This Offering Circular shall be read and construed on the basis that such
documents are incorporated in and form part of this Offering Circular.
Each of the Issuer and the Guarantor, having made all reasonable enquiries, confirms that (i) this Offering
Circular contains all information with respect to the Issuer, the Guarantor and other subsidiaries of the Guarantor
(together, the “Group”), the Notes and the Guarantee which is material in the context of the issue and offering
of the Notes (including the information which is required by applicable laws and according to the particular
nature of the Issuer, the Guarantor, the Group, the Notes and the Guarantee, is necessary to enable investors and
their investment advisers to make an informed assessment of the assets and liabilities, financial position, profits
and losses, and prospects of the Issuer, the Guarantor, the Group and of the rights attaching to the Notes and the
Guarantee); (ii) the statements contained in this Offering Circular are in every material particular true and
accurate and not misleading; (iii) the opinions and intentions expressed in this Offering Circular with regard to
the Issuer, the Guarantor and the Group are honestly held, have been reached after considering all relevant
circumstances and are based on reasonable assumptions; (iv) there are no other facts in relation to the Issuer, the
Guarantor, the Group, the Notes, or the Guarantee, the omission of which would, in the context of the issue and
offering of the Notes, make any statement in this Offering Circular misleading in any material respect; and (v)
all reasonable enquiries have been made by each of the Issuer and the Guarantor to ascertain all facts in relation
to the Issuer, the Guarantor, the Group, the Notes and the Guarantee and to verify the accuracy of all such
information and statements in this Offering Circular.
The distribution of this Offering Circular and any Pricing Supplement and the offering, sale and delivery of the
Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular
comes are required by the Issuer, the Guarantor, each of Haitong International Securities Company Limited and
Haitong Bank, Macau Branch (together, the “Arrangers” and the Dealers (as defined in “Summary of the
Programme”)), the Trustee and the Agents (as defined in the Terms and Conditions of the Notes) to inform
themselves about and to observe any such restrictions. None of the Issuer, the Guarantor, the Arrangers, the
Dealers, the Trustee and the Agents or any of their respective affiliates, directors, employees, agents,
representatives, officers or advisers or any person who controls any of them represents that this Offering Circular
or any Pricing Supplement may be lawfully distributed, or that any Notes may be lawfully offered, in compliance
with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption
available thereunder, or assumes any responsibility for facilitating any such distribution or offering. No action
is being taken to permit a public offering of any of the Notes or the distribution of this Offering Circular or any
Pricing Supplement in any jurisdiction where action would be required for such purposes. There are restrictions
i
on the offer and sale of the Notes, and the circulation of documents relating thereto, in certain jurisdictions
including the United States, the United Kingdom, the European Economic Area, Hong Kong, the PRC, the British
Virgin Islands, Singapore, Japan and Macau and to persons connected therewith. For a description of further
restrictions on offers and sales of the Notes and distribution of this Offering Circular, see “Subscription and Sale”
below. This Offering Circular is personal to each offeree and does not constitute an offer to any other person or
to the public generally to subscribe for, or otherwise acquire, the Notes. Distribution of this Offering Circular
and any Pricing Supplement to any person other than the prospective investor and any person retained to advise
such prospective investor with respect to its purchase is unauthorised. Each prospective investor, by accepting
delivery of this Offering Circular, is deemed to have agreed to the foregoing and to make no photocopies of this
Offering Circular, any Pricing Supplement or any documents referred to in this Offering Circular or any Pricing
Supplement.
No person has been or is authorised to give any information or to make any representation concerning the Issuer,
the Guarantor, the Group, the Notes or the Guarantee other than as contained in this Offering Circular or any
other document entered into in relation to the Programme and the sale of Notes and, if given or made, any such
other information or representation should not be relied upon as having been authorised by the Issuer, the
Guarantor, the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors,
employees, agents, representatives, officers or advisers or any person who controls any of them. Neither the
delivery of this Offering Circular or any Pricing Supplement nor any offering, sale or delivery made in
connection with the issue of the Notes shall, under any circumstances, constitute a representation that there has
been no change or development reasonably likely to involve a change in the affairs of the Issuer, the Guarantor
or the Group since the date hereof, or if later, the date upon which this Offering Circular has been most recently
amended or supplemented or create any implication that the information contained herein is correct as at any date
subsequent to the date hereof, or if later, the date upon which this Offering Circular has been most recently
amended or supplemented, or that any other information supplied in connection with the Programme is correct
as at any time subsequent to the date on which it is supplied or, if different, the date indicted in the document
containing the same. This Offering Circular or any Pricing Supplement does not constitute an offer of, or an
invitation by or on behalf of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents or
any of their respective affiliates, directors, employees, agents, representatives, officers or advisers or any person
who controls any of them to subscribe for or purchase the Notes and may not be used for the purpose of an offer
to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is
not authorised or is unlawful.
This Offering Circular or any Pricing Supplement is being furnished by the Issuer and the Guarantor, in
connection with the Programme and the offering of the Notes and is exempt from registration under the Securities
Act solely for the purpose of enabling a prospective investor to consider purchasing the Notes. Investors must
not use this Offering Circular or any Pricing Supplement for any other purpose, make copies of any part of this
Offering Circular or any Pricing Supplement or give a copy of it to any other person, or disclose any information
in this Offering Circular or any Pricing Supplement to any other person. The information contained in this
Offering Circular or any Pricing Supplement has been provided by the Issuer, the Guarantor and other sources
identified in this Offering Circular or the relevant Pricing Supplement. Any reproduction or distribution of this
Offering Circular or any Pricing Supplement, in whole or in part, and any disclosure of its contents or use of any
information herein for any purpose other than the consideration of an investment in the Programme or the Notes
offered by this Offering Circular or any Pricing Supplement is prohibited. By accepting delivery of this Offering
Circular or any Pricing Supplement each investor is deemed to have agreed to these restrictions.
None of the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors,
employees, agents, representatives, officers or advisers or any person who controls any of them has
independently verified the information contained in this Offering Circular. Accordingly, no representation,
warranty or undertaking, express or implied, is made or given and no responsibility or liability is accepted, by
the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors, employees,
agents, representatives, officers or advisers or any person who controls any of them, as to the accuracy,
completeness or sufficiency of the information contained in this Offering Circular or any other information
supplied in connection with the Programme. Nothing contained in this Offering Circular is, or shall be relied
upon as, a promise, representation or warranty by the Arrangers, the Dealers, the Trustee or the Agents or any
of their respective affiliates, directors, employees, agents, representatives, officers or advisers or any person who
controls any of them. This Offering Circular is not intended to provide the basis of any credit or other evaluation
nor should it be considered as a recommendation by any of the Issuer, the Guarantor, the Arrangers, the Dealers,
the Trustee or the Agents or any of their respective affiliates, directors, employees, agents, representatives,
officers or advisers or any person who controls any of them that any recipient of this Offering Circular should
purchase any Notes.
ii
Each person receiving this Offering Circular acknowledges that it has not relied on the Arrangers, the Dealers,
the Trustee or the Agents or any of their respective affiliates, directors, employees, agents, representatives,
officers or advisers or any person who controls any of them in connection with its investigation of the accuracy
of such information or its investment decision, and each such person must rely on its own examination of the
Issuer, the Guarantor and the Group, and the merits and risks involved in investing in any Notes. See “Risk
Factors” below for a discussion of certain factors to be considered in connection with an investment in the Notes.
To the fullest extent permitted by law, none of the Arrangers, the Dealers, the Trustee or the Agents or any of
their respective affiliates, directors, employees, agents, representatives, officers or advisers or any person who
controls any of them accepts any responsibility for the contents of this Offering Circular and assumes no
responsibility for the contents, accuracy, completeness or sufficiency of any such information or for any other
statement, made or purported to be made by the Arrangers, the Dealers, the Trustee or the Agents or any of their
respective affiliates, directors, employees, agents, representatives, officers or advisers or any person who
controls any of them or on their behalf in connection with the Issuer, the Guarantor, the Group, the Programme,
the issue and offering of the Notes or the giving of the Guarantee. Each of the Arrangers, the Dealers, the Trustee
and the Agents and each of their respective affiliates, directors, employees, agents, representatives, officers and
advisers and each person who controls any of them accordingly disclaims all and any liability, whether arising
in tort or contract or otherwise, which it might otherwise have in respect of this Offering Circular or any such
statement. None of the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates,
directors, employees, agents, representatives, officers or advisers or any person who controls any of them
undertakes to review the results of operations, financial condition or affairs of the Issuer, the Guarantor or the
Group during the life of the arrangements contemplated by this Offering Circular or to advise any investor or
prospective investor in any Notes of any information coming to the attention of the Arrangers, the Dealers, the
Trustee or the Agents or any of their respective affiliates, directors, employees, agents, representatives, officers
or advisers or any person who controls any of them.
IN CONNECTION WITH THE ISSUE OF ANY TRANCHE OF NOTES, ANY OF THE RELEVANT
DEALERS (IF ANY) APPOINTED IN THE APPLICABLE PRICING SUPPLEMENT AND ACTING IN
ITS CAPACITY AS STABILISATION MANAGER (THE “STABILISATION MANAGER”) OR ANY
PERSON(S) ACTING ON BEHALF OF THE STABILISATION MANAGER MAY OVER-ALLOT NOTES
OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE(S) OF THE
NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER,
THERE IS NO ASSURANCE THAT THE STABILISATION MANAGER (OR ANY PERSON ACTING ON
BEHALF OF THE STABILISATION MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY
STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC
DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE
ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER
THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE
NOTES. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE
RELEVANT STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF THE
STABILISING MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
In connection with the offering of any Tranche of Notes, the Arrangers, the Dealers and/or their respective
affiliates, or affiliates of the Issuer or the Guarantor, may act as investors and place orders, receive allocations
and trade such Notes for their own account and such orders, allocations or trading of the Notes may be material.
These entities may hold or sell relevant Notes or purchase further Notes for their own account in the secondary
market or deal in any other securities of the Issuer or the Guarantor, and therefore, they may offer or sell the
relevant Notes or other securities otherwise than in connection with the Programme or the offering of the relevant
Notes. Accordingly, references herein to the offering of any Notes should be read as including any offering of
the Notes to the Arrangers, the Dealer and/or their respective affiliates, or affiliates of the Issuer or the Guarantor
as investors for their own account. Such entities are not expected to disclose such transactions or the extent of
any such investment, otherwise than in accordance with any applicable legal or regulatory requirements. If such
transactions occur, the trading price and liquidity of the Notes may be impacted.
iii
MiFID II product governance/target market – The Pricing Supplement in respect of any Notes may include
a legend entitled “MiFID II Product Governance” which will outline the target market assessment in respect of
the Notes and which channels for distribution of the Notes are appropriate. Any distributor should take into
consideration the target market assessment; however, a distributor subject to MiFID II is responsible for
undertaking its own target market assessment in respect of the Notes (by either adopting or refining the target
market assessment) and determining appropriate distribution channels.
A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product
Governance Rules, any Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but
otherwise neither the Arrangers nor the Dealers nor any of their respective affiliates will be a manufacturer for
the purpose of the MiFID Product Governance Rules.
UK MiFIR product governance/target market – The Pricing Supplement in respect of any Notes may include
a legend entitled “UK MiFIR Product Governance” which will outline the target market assessment in respect
of the Notes and which channels for distribution of the Notes are appropriate. Any distributor should take into
consideration the target market assessment; however, a distributor subject to the UK MiFIR Product Governance
Rules is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting
or refining the target market assessment) and determining appropriate distribution channels.
A determination will be made in relation to each issue about whether, for the purpose of the UK MiFIR Product
Governance Rules, any Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but
otherwise neither the Arrangers nor the Dealers nor any of their respective affiliates will be a manufacturer for
the purpose of the UK MIFIR Product Governance Rules.
IMPORTANT – EEA RETAIL INVESTORS – If the Pricing Supplement in respect of any Notes includes a
legend entitled “Prohibition of Sales to EEA Retail Investors”, the Notes are not intended to be offered, sold or
otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as
defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning of Insurance Distribution
Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1)
of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation. Consequently no key
information document required by PRIIPs Regulation for offering or selling the Notes or otherwise making them
available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise
making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
IMPORTANT – UK RETAIL INVESTORS – If the Pricing Supplement in respect of any Notes includes a
legend entitled “Prohibition of Sales to UK Retail Investors”, the Notes are not intended to be offered, sold or
otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the UK. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client, as
defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of
the EUWA; (ii) a customer within the meaning of the provisions of the FSMA and any rules or regulations made
under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional
client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law
by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as
it forms part of domestic law by virtue of the EUWA. Consequently no key information document required by
UK PRIIPs Regulation for offering or selling the Notes or otherwise making them available to retail investors
in the UK has been prepared and therefore offering or selling the Notes or otherwise making them available to
any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.
PRODUCT CLASSIFICATION PURSUANT TO SECTION 309B OF THE SECURITIES AND FUTURES
ACT 2001 OF SINGAPORE – In connection with Section 309B of the SFA and the CMP Regulations 2018,
unless otherwise stated in the Pricing Supplement in respect of any Notes, all Notes to be issued under the
Programme shall be prescribed capital markets products (as defined in the CMP Regulations 2018) and Excluded
Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and
MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
iv
Prospective investors should not construe anything in this Offering Circular as legal, business or tax advice. Each
prospective investor should determine for itself the relevance of the information contained in this Offering
Circular and consult its own legal, business and tax advisers as needed to make its investment decision and
determine whether it is legally able to purchase the Notes under applicable laws or regulations.
This Offering Circular, the Pricing Supplement and any other information supplied in connection with the
Programme or any Notes (i) are not intended to provide the basis of any credit or other evaluation and (ii) should
not be considered as a recommendation by any of the Issuer, the Guarantor, the Arrangers, the Dealers, the
Trustee or the Agents or any of their respective affiliates, directors, employees, agents, representatives, officers
or advisers or any person who controls any of them that any recipient of this Offering Circular should purchase
any Notes. Each potential purchaser of the Notes should determine for itself the relevance of the information
contained in this Offering Circular and its purchase of the Notes should be based upon such investigations with
its own tax, legal and business advisers as it deems necessary.
Notice to capital market intermediaries and prospective investors pursuant to paragraph 21 of the Hong
Kong SFC Code of Conduct – Important Notice to Prospective Investors: Prospective investors should be
aware that certain intermediaries in the context of certain offerings of Notes pursuant to this Programme (each
such offering, a “CMI Offering”), including certain Dealers, may be “capital market intermediaries” (the
“CMIs”) subject to Paragraph 21 of the Code of Conduct for Persons Licensed by or Registered with the
Securities and Futures Commission (the “SFC Code”). This notice to prospective investors is a summary of
certain obligations the SFC Code imposes on such CMIs, which require the attention and cooperation of
prospective investors. Certain CMIs may also be acting as “overall coordinators” (the “OCs”) for a CMI Offering
and are subject to additional requirements under the SFC Code. The application of these obligations will depend
on the role(s) undertaken by the relevant Dealer(s) in respect of each CMI Offering.
Prospective investors who are the directors, employees or major shareholders of the Issuer, the Guarantor, a CMI
or its group companies would be considered under the SFC Code as having an association (an “Association”)
with the Issuer, the Guarantor, the CMI or the relevant group company. Prospective investors associated with the
Issuer, the Guarantor or any CMI (including its group companies) should specifically disclose this when placing
an order for the relevant Notes and should disclose, at the same time, if such orders may negatively impact the
price discovery process in relation to the relevant CMI Offering. Prospective investors who do not disclose their
Associations are hereby deemed not to be so associated. Where prospective investors disclose their Associations
but do not disclose that such order may negatively impact the price discovery process in relation to the relevant
CMI Offering, such order is hereby deemed not to negatively impact the price discovery process in relation to
the relevant CMI Offering.
Prospective investors should ensure, and by placing an order prospective investors are deemed to confirm, that
orders placed are bona fide, are not inflated and do not constitute duplicated orders (i.e. two or more
corresponding or identical orders placed via two or more CMIs). A rebate may be offered by the Issuer to all
private banks for orders they place (other than in relation to Notes subscribed by such private banks as principal
whereby it is deploying its own balance sheet for onward selling to investors), payable upon closing of the
relevant CMI Offering based on the principal amount of the Notes distributed by such private banks to investors.
Private banks are deemed to be placing an order on a principal basis unless they inform the CMIs otherwise. As
a result, private banks placing an order on a principal basis (including those deemed as placing an order as
principal) will not be entitled to, and will not be paid, the rebate. Details of any such rebate will be set out in
the applicable Pricing Supplement or otherwise notified to prospective investors. If a prospective investor is an
asset management arm affiliated with any relevant Dealer, such prospective investor should indicate when
placing an order if it is for a fund or portfolio where the relevant Dealer or its group company has more than
50% interest, in which case it will be classified as a “proprietary order” and subject to appropriate handling by
CMIs in accordance with the SFC Code and should disclose, at the same time, if such “proprietary order” may
negatively impact the price discovery process in relation to the relevant CMI Offering. Prospective investors who
do not indicate this information when placing an order are hereby deemed to confirm that their order is not a
“proprietary order”. If a prospective investor is otherwise affiliated with any relevant Dealer, such that its order
may be considered to be a “proprietary order” (pursuant to the SFC Code), such prospective investor should
indicate to the relevant Dealer when placing such order. Prospective investors who do not indicate this
information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”.
Where prospective investors disclose such information but do not disclose that such “proprietary order” may
negatively impact the price discovery process in relation to the relevant CMI Offering, such “proprietary order”
is hereby deemed not to negatively impact the price discovery process in relation to the relevant CMI Offering.
v
Prospective investors should be aware that certain information may be disclosed by CMIs (including private
banks) which is personal and/or confidential in nature to the prospective investor. By placing an order,
prospective investors are deemed to have understood and consented to the collection, disclosure, use and transfer
of such information by the relevant Dealers and/or any other third parties as may be required by the SFC Code,
including to the Issuer, the Guarantor, any OCs, relevant regulators and/or any other third parties as may be
required by the SFC Code, it being understood and agreed that such information shall only be used for the
purpose of complying with the SFC Code, during the bookbuilding process for the relevant CMI Offering. Failure
to provide such information may result in that order being rejected.
THE NOTES AND THE GUARANTEE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE
OR OTHER JURISDICTION OF THE UNITED STATES, AND THE NOTES MAY INCLUDE BEARER
NOTES THAT ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS. SUBJECT TO CERTAIN
EXCEPTIONS, THE NOTES MAY NOT BE OFFERED OR SOLD OR, IN THE CASE OF BEARER
NOTES, DELIVERED, WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS (AS DEFINED IN REGULATION S OR THE U.S. INTERNAL REVENUE CODE OF
1986, AS AMENDED, AND REGULATIONS THEREUNDER IN CASE OF BEARER NOTES).
This Offering Circular does not describe all of the risks and investment considerations (including those relating
to each investor’s particular circumstances) of an investment in Notes of a particular issue. Each potential
purchaser of Notes should refer to and consider carefully the relevant Pricing Supplement for each particular
issue of Notes, which may describe additional risks and investment considerations associated with such Notes.
The risks and investment considerations identified in this Offering Circular and the applicable Pricing
Supplement are provided as general information only. Investors should consult their own financial and legal
advisers as to the risks and investment considerations arising from an investment in an issue of Notes and should
possess the appropriate resources to analyse such investment and the suitability of such investment in their
particular circumstances. Each person receiving this Offering Circular acknowledges that such person has not
relied on the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors,
employees, agents, representatives, officers or advisers or any person who controls any of them in connection
with its investigation of the accuracy of such information or its investment decision.
Industry and Market Data
Market data and certain information and statistics included in this Offering Circular have been obtained from
both public and private sources, including market research, publicly available information and industry
publications. Although each of the Issuer and the Guarantor believes the information to be reliable, it has not
been independently verified by the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents
or any of their respective affiliates, directors, employees, agents, representatives, officers or advisers or any
person who controls any of them and none of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee
or the Agents or any of their respective affiliates, directors, employees, agents, representatives, officers or
advisers or any person who controls any of them makes any representation as to the correctness, accuracy or
completeness of such information. In addition, third-party information providers may have obtained information
from market participants and such information may not have been independently verified. In making an
investment decision, each investor must rely on its own examination of the Issuer, the Guarantor, the Group and
the Programme, the terms of the offering and the Notes, including the merits and risks involved.
vi
PRESENTATION OF FINANCIAL INFORMATION
This Offering Circular contains consolidated financial information of the Guarantor as at and for the years ended
31 December 2020, 2021 and 2022, which has been extracted from the audited consolidated financial statements
of the Guarantor as at and for the year ended 31 December 2021 (the “Guarantor’s 2021 Audited Consolidated
Financial Statements”) and as at and for the year ended 31 December 2022 (the “Guarantor’s 2022 Audited
Consolidated Financial Statements” and together with the Guarantor’s 2021 Audited Consolidated Financial
Statements, the “Guarantor’s Audited Consolidated Financial Statements”) which are included elsewhere in
this Offering Circular. The Guarantor’s Audited Consolidated Financial Statements were prepared and presented
in accordance with the International Financial Reporting Standards (“IFRS”) and have been audited by
PricewaterhouseCoopers (“PwC”), the independent auditor of the Guarantor, in accordance with the International
Standards on Auditing.
vii
INFORMATION INCORPORATED BY REFERENCE AND FINANCIAL INFORMATION
This Offering Circular should be read and construed in conjunction with:
(i) each relevant Pricing Supplement; and
(ii) all amendments and supplements from time to time to this Offering Circular; and
(iii) any audited consolidated annual financial statements or unaudited but reviewed interim condensed
consolidated financial statements of the Group, in each case together with any audit or review reports
prepared in connection therewith, that are published subsequent to the date of this Offering Circular as
amended and supplemented from time to time,
which shall be deemed to be incorporated in, and to form part of, this Offering Circular and which shall be
deemed to modify or supersede the contents of this Offering Circular.
Any statement contained in this Offering Circular or in a document incorporated by reference into this Offering
Circular will be deemed to be modified or superseded for purposes of this Offering Circular to the extent that
a statement contained in any such subsequent document modifies or supersedes that statement. Any statement
that is modified or superseded in this manner will no longer be a part of this Offering Circular, except as modified
or superseded.
Copies of the documents mentioned in (i) and (ii) above which are so deemed to be incorporated in, and to form
part of, this Offering Circular will be available (upon prior written request and proof of holding and identity to
the satisfaction of the Trustee), at all reasonable times during usual business hours (being between 9:00 a.m. and
3:00 p.m., Hong Kong time) on any weekday (Saturdays, Sundays and public holidays excepted), for inspection
at the principal office of the Trustee as set out at the end of this Offering Circular.
The documents incorporated by reference in this Offering Circular have been or will be published on the website
of Hong Kong Stock Exchange. For the avoidance of doubt, the content of the websites of Hong Kong Stock
Exchange does not form part of this Offering Circular.
viii
SUPPLEMENTAL OFFERING CIRCULAR
Each of the Issuer and the Guarantor has given an undertaking to the Dealers that unless the Issuer does not
intend to issue Notes under the Programme for the time being, if at any time during the duration of the
Programme any event shall have occurred as a result of which this Offering Circular, as then amended or
supplemented, would include an untrue statement of a material fact or omit to state a material fact necessary to
make the statements herein, in the light of the circumstances under which they are made when this Offering
Circular is delivered, not misleading, the Issuer or the Guarantor will as soon as reasonably practicable notify
the Dealers (other than those appointed as such solely in respect of one or more specified Tranches) (the
“Permanent Dealers”), or, in the case of a change affecting a specific issue of Notes, the relevant Dealer or, if
more than one, the Lead Manager (as specified in the relevant subscription agreement) on behalf of the relevant
Dealers), and, upon reasonable request, will prepare such amendment or supplement to this Offering Circular
which will correct such statement or omission.
ix
CERTAIN DEFINITIONS, CONVENTIONS AND CURRENCY PRESENTATION
In this Offering Circular, unless otherwise specified or the context otherwise requires, all references to the
“PRC”, “China” and “Mainland China” are to the People’s Republic of China and for geographical reference
only (unless otherwise stated) exclude Hong Kong, Macau and Taiwan; all references to the “United States” and
“U.S.” are to the United States of America; all references to “PRC Government” are to the central government
of the PRC, including all political subdivisions (including provincial, municipal and other regional or local
governmental entities) and instrumentalities thereof, or, where the context requires, any of them; all references
to “Hong Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China; all
references to “Macau” or “Macao” are to the Macau Special Administrative Region of the People’s Republic of
China; all references to “Renminbi”, “RMB” and “CNY” are to the lawful currency of the PRC; all references
to “HK$” and “HK dollars” are to the lawful currency of the Hong Kong; all references to “EUR”, “euro” and
“ C” are to the lawful currency of the member states of the European Union that have adopted the single currency
in accordance with the treaty establishing the European Community, as amended from time to time and all
references to “USD”, “U.S.$” and “U.S. dollars” are to the lawful currency of the United States of America.
This Offering Circular contains translation of certain Renminbi amounts into U.S. dollars at specified rates solely
for the convenience of the reader. Unless otherwise specified, where financial information in relation to the
Guarantor has been translated into U.S. dollars, it has been so translated, for convenience only, at the rate of
RMB6.8972 to U.S.$1.00 (the noon buying rate in New York City on 30 December 2022 as set forth in the weekly
H.10 statistical release of the Board of Governors of the Federal Reserve System). No representation is made that
the Renminbi amounts referred to in this Offering Circular could have been or could be converted into U.S.
dollars at any particular rate or at all, or vice versa.
In this Offering Circular, where information has been presented in thousands or millions of units, amounts may
have been rounded up or down. Accordingly, totals of columns or rows of numbers in tables may not be equal
to the apparent total of the individual items and actual numbers may differ from those contained herein due to
rounding. References to information in billions of units are to the equivalent of a thousand million units.
The English names of the PRC nationals, entities, departments, facilities, laws, regulations, certificates, titles and
the like are translations of their Chinese names and are included for identification purpose only. In the event of
any inconsistency, the Chinese name prevails.
x
DEFINITIONS
In this Offering Circular, references to:
“A Share(s)” are to domestic shares of the Haitong Securities, with a nominal value of RMB1.00 each, which
are subscribed for or credited as paid up in Renminbi and are listed for trading on the Shanghai Stock
Exchange with stock code 600837
“AUM” are to assets under management
“B share” are to shares denominated in Renminbi, subscribed for and traded in foreign currency on the
Shanghai Stock Exchange or the Shenzhen Stock Exchange
“BSE” are to the Beijing Stock Exchange
“CSRC” are to the China Securities Regulatory Commission ( )
“Developing New Businesses” are to (i) margin financing and securities lending ( ), (ii)
collateralised repo business ( ), (iii) stock repo trading ( ), (iv) asset-backed securities (
), (v) future cash arbitrage ( ), (vi) alternative investment ( ), (vii) direct
investment ( ) and (viii) stock index and futures brokerage ( )
“enterprise annuity” are to the supplementary pension insurance scheme established voluntarily by
enterprises and their employees in addition to the basic pension insurance in which they participate in
accordance with the law
“ESG” are to environmental, social and governance
“ETF(s)” are to the exchange-traded fund(s)
“FICC” are to fixed income, currency and commodities
“Fullgoal Fund Management” are to Fullgoal Fund Management Co., Ltd. ( ) a
limited liability company established in the PRC, in which the Haitong Securities owned an equity interest
of 27.775% as at 31 December 2022
“futures IB business” are to the business activities in which securities firms, as commissioned by futures
companies, introduce customers to futures companies to provide futures brokerage and other related services
“Group” are to Haitong Securities and its subsidiaries
“Guarantor” or “Haitong Securities” are to Haitong Securities Co., Ltd. ( ), a
company established in the PRC and listed on the SSE under the stock code of 600837 and listed on the
HKSE under the stock of 06837
“H Share(s)” are to ordinary shares in the share capital of the Haitong Securities with a nominal value of
RMB1.00 each, which are listed on the Main Board of the Hong Kong Stock Exchange with stock code 06837
“Haitong Asset Management” are to Shanghai Haitong Securities Asset Management Company Limited (
), a limited liability company established in the PRC and a wholly-owned
subsidiary of Haitong Securities
“Haitong Bank” are to Haitong Bank, S.A., previously known as Banco Espirito Santo de Investimento, S.A.
(“BESI”), a limited liability company incorporated in Portugal and a wholly-owned subsidiary of Haitong
Securities
xi
“Haitong Capital Investment” are to Haitong Capital Investment Company Limited (
), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of Haitong
Securities
“Haitong-Fortis PE Fund Management” are to Haitong-Fortis Private Equity Fund Management Co., Ltd.
( ), a limited liability company established in the PRC, and a non-wholly
owned subsidiary of Haitong Securities
“Haitong Futures” are to Haitong Futures Co., Ltd. ( ), a limited liability company
established in the PRC, and a non-wholly owned subsidiary of Haitong Securities, and listed on the National
Equities Exchange and Quotation on 6 March 2018
“Haitong Innovation Securities Investment” are to Haitong Innovation Securities Investment Company
Limited ( ), a limited liability company established in the PRC and a wholly-
owned subsidiary of the Haitong Securities
“Haitong International Holdings” are to Haitong International Holdings Limited ( ),
a wholly-owned subsidiary of the Haitong Securities as at 30 June 2019 and incorporated in Hong Kong
“Haitong International Securities” are to Haitong International Securities Group Limited (
), previously known as Taifook Securities, a company listed on the Main Board of the Hong
Kong Stock Exchange under stock code 665, and a non-wholly owned subsidiary of Haitong Securities
“HFT Investment Management” are to HFT Investment Management Co., Ltd. ( ),
a limited liability company established in the PRC and a non-wholly owned subsidiary of Haitong Securities
“Hong Kong Stock Exchange” or “HKSE” are to The Stock Exchange of Hong Kong Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited
“IPO” are to initial public offering
“Issuer” are to Haitong International Finance Holdings Limited
“Listing Rules” are to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong
Limited (as amended from time to time)
“Ministry of Finance” are to the Ministry of Finance of the PRC ( )
“MOFCOM” are to the Ministry of Commerce of the PRC ( )
“NDRC” are to National Development and Reform Commission of the PRC (
)
“NEEQ” are to the National Equities Exchange and Quotations ( )
“Noteholder(s)” are to holder(s) of the Note(s)
“NSSF” are to the National Council for Social Security Fund of the PRC ( )
“OTC” are to over-the-counter
“PBOC” are to The People’s Bank of China
“QDII” are to Qualified Domestic Institutional Investor ( )
“QFII” are to Qualified Foreign Institutional Investor ( )
“QFLP Funds” are to the Qualified Foreign Limited Partner Fund ( )
xii
“Regulation S” are to Regulation S under the U.S. Securities Act
“RQFII” are to Renminbi Qualified Foreign Institutional Investor ( ), a
programme launched in the PRC which allows Hong Kong subsidiaries of PRC brokerage companies and
fund houses to facilitate investments of offshore Renminbi into the domestic securities market
“RQFLP” are to Renminbi Qualified Foreign Limited Partner ( )
“SAC” are to the Securities Association of China ( )
“SAFE” are to the State Administration of Foreign Exchange of the PRC or its local counterparts
“Securities Act” are to the United States Securities Act of 1933, as amended
“SFA” are to the Securities and Futures Act 2001 of Singapore
“Shanghai Stock Exchange” or “SSE” are to the Shanghai Stock Exchange ( )
“Sino-foreign joint venture securities firm(s)” are to (i) securities firm(s) established jointly by foreign
shareholders and PRC shareholders through equity contributions in accordance with applicable PRC law; and
(ii) securities firm(s) formed as a result of foreign investors being assigned with, or subscribing for, equity
interests in PRC security firm in accordance with applicable PRC law. In each case, foreign shareholders
shall not in the aggregate hold, directly or indirectly, more than one-third of the shares or equity interests
in such securities firm
“SME” are to small and medium enterprises
“SPAC” are to special purpose acquisition company
“State Council” are to State Council of the PRC ( )
“STAR Market” are to the Science and Technology Innovation Board of SSE
“stock index futures” are to cash-settled standardised futures contracts on the value of a particular stock
market index
“Taifook Securities” are to Taifook Securities Group Limited ( ), renamed as Haitong
International Securities Group Limited in November 2010
“targeted asset management scheme(s)” are to a type of special vehicle managed by PRC securities firms
for annuity plans, other institutional investors and individual investors with large amount of investment
assets
“UniTrust” are to Haitong UniTrust International Financial Leasing Co., Ltd. (
) (formerly known as Haitong UniTrust International Leasing Corporation (
)), a company established in the PRC and listed on the Main Board of the Hong Kong Stock Exchange
under the stock code of 1905 and a non-wholly owned subsidiary of Haitong Securities
“UT Capital Group” are to Haitong UT Capital Group Co., Limited ( ) (formerly
known as UT Capital Group Co., Limited ( )) and its subsidiaries
“UT Capital Holdings” are to UT Capital Holdings Co., Ltd., an investment holding company incorporated
under the laws of the Cayman Islands
“Wind Info” are to Wind Information Co., Ltd., a company with limited liability incorporated in the PRC
in 1994 and an integrated service provider of financial data, information and software
In this Offering Circular, the terms “associate,” “connected transaction,” “subsidiary” and “substantial
shareholder” shall have the meanings given to such terms in the Listing Rules, unless the context otherwise
requires.
xiii
FORWARD-LOOKING STATEMENTS
This Offering Circular includes “forward-looking statements”. All statements other than statements of historical
facts contained in this Offering Circular constitute “forward-looking statements”. Some of these statements can
be identified by forward-looking terms, such as “anticipate”, “target”, “believe”, “can”, “would”, “could”,
“estimate”, “expect”, “aim”, “intend”, “may”, “plan”, “will”, “would” or similar words. However, these words
are not the exclusive means of identifying forward-looking statements. All statements regarding expected
financial condition, results of operations, business plans and prospects are forward-looking statements. These
forward-looking statements include, but are not limited to, statements as to the business strategy, revenue,
profitability, planned projects and other matters as they relate to the Issuer, the Guarantor, and/or the Group
discussed in this Offering Circular regarding matters that are not historical facts.
The factors that could cause the actual results, performances and achievements of the Issuer, the Guarantor or
the Group or any member of the Group to be materially different include, among others:
general economic, political and business conditions and competitive environment, including those related to
the PRC and globally;
the Group’s ability to successfully implement its business plans and strategies;
various business opportunities that the Group may pursue;
financial condition, performance and business prospects of the Group;
the Group’s capital expenditure plans and its ability to carry out those plans;
the Group’s ability to control its costs;
the continued availability of capital and financing;
changes in the competition landscape in the industries where the Group operates;
interest rates and foreign exchange rates, taxes and duties,
the actions and developments of the Group’s competitors;
financial condition and performance;
any changes in the laws, rules and regulations of the PRC Government, the People’s Government of Shanghai
City and other relevant jurisdictions in which the Group operates and the rules, regulations and policies of
the relevant governmental authorities relating to all aspects of the Group’s business;
changes or volatility in interest rates, foreign exchange rates, equity prices or other rates or prices, including
those pertaining to the PRC and the industry and markets in which the Group operates;
fluctuations in prices of and demand for products and services that the Group provides;
various business opportunities that the Group may pursue;
macroeconomic measures taken by the PRC Government to manage economic growth;
natural disasters, industrial action, terrorist attacks and other events beyond the control of the Group;
other risks associated with industries in which the Group operates; and
other factors, including those discussed in “Risk Factors”.
Additional factors that could cause actual results, performance or achievements to differ materially include, but
are not limited to, those discussed in “Risk Factors” below and elsewhere in this Offering Circular. Each of the
Issuer and the Guarantor cautions investors not to place undue reliance on these forward-looking statements
which reflect their managements’ view only as at the date of this Offering Circular. Neither the Issuer nor the
Guarantor undertakes any obligation to update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this Offering Circular might not occur.
xiv
CONTENTS
Page
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SUMMARY OF THE PROGRAMME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SUMMARY CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
TERMS AND CONDITIONS OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM . . . . . . . . 92
FORM OF PRICING SUPPLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
CAPITALISATION AND INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
DESCRIPTION OF THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
DESCRIPTION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT BOARD OF DIRECTORS . . . . . . . . 148
EXCHANGE RATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
PRC REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
PRC CURRENCY CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
xv
SUMMARY
The summary below is only intended to provide a limited overview of information described in more detail
elsewhere in this Offering Circular. As it is a summary, it does not contain all of the information that may be
important to investors and terms defined elsewhere in this Offering Circular shall have the same meanings when
used in this summary. Prospective investors should therefore read this Offering Circular in its entirety, including
the section entitled “Risk Factors”, before making an investment decision.
THE GROUP
The Group is a leading full-service securities firm in the PRC with an integrated business platform, extensive
branch network and substantial customer base. The Group has established prudent operating strategies and is the
only major PRC securities firm established in the 1980s that remains in continuous operations under the same
brand without receiving government-backed capital injections or being the target of a successful acquisition or
restructuring. Its A Shares have been listed on the Shanghai Stock Exchange with stock code 600837 since July
2007 and its H Shares have been listed on the Main Board of the Hong Kong Stock Exchange with stock code
6837 since April 2012. Leveraging its integrated business platform, the Group provides a comprehensive range
of financial products and services domestically and overseas, and primarily focuses on five principal business
lines in the PRC, comprising wealth management, investment banking, asset management, trading and
institutional client services, and financial leasing. The Group has gained leading market positions across multiple
business lines in the PRC securities industry, and it also provides a variety of securities products and services
overseas. In addition, the Group has a long track record of brokerage operations across business cycles and
enjoys a strong market position in China’s retail brokerage segment. The Group has become one of the leading
players in China’s financial leasing segment following the acquisition of UT Capital Group.
The Group is one of the largest securities firms in the PRC. As at 31 December 2020, 2021 and 2022, the Group
had total assets of RMB694,073.4 million, RMB744,925.1 million and RMB753,607.6 million, respectively, and
total equity of RMB168,126.3 million, RMB177,754.8 million and RMB177,622.1 million, respectively. For the
years ended 31 December 2020, 2021 and 2022, the Group’s total revenue, gains and other income was
RMB54,277.2 million, RMB57,809.6 million and RMB41,980.2 million, respectively, and its profit for the years
was RMB12,037.2 million, RMB13,747.9 million and RMB5,196.2 million, respectively. As at 31 December
2022, the Group had 337 securities and futures brokerage business departments (including 301 securities business
departments and 36 futures business departments) located across 30 provinces, municipalities and autonomous
regions in the PRC, as well as branches, subsidiaries or offices in 15 countries and regions including Asia,
Europe, North America, South America and Oceania. As at 31 December 2022, the Group had approximately over
21 million domestic and overseas customers.
As at 31 December 2022, the five principal business lines of the Group in the PRC include:
Wealth management. The Group engages in providing comprehensive financial services and investment
solutions to retail and high-net-worth customers, including retail brokerage business, sales of financial
products, financing business such as margin financing, securities lending and stock pledge, and future
business.
Investment banking. The Group engages in providing sponsorship and underwriting services for corporate
and government customers with regard to financing activities in both equity and debt capital markets, the
provision of financial advisory services to corporate customers for mergers and acquisitions as well as asset
restructurings, and the provision of NEEQ services. Based on the nature of business, the investment banking
business of the Group is further categorised into segments of equity financing business, debt financing
business, mergers and acquisitions financing business, and NEEQ services and structural financing business.
The Group strives to provide customers with “one stop” domestic and overseas investment banking services.
Asset management. The Group offers comprehensive investment management services on diversified
products to individuals, corporations and institutional clients, including asset management, fund
management, public and private equity investment services. Haitong Asset Management carries out
businesses including targeted asset management, collective asset management, specialised asset
management, QDII business, and innovative business. The principal businesses of HFT Investment
Management and Fullgoal Fund Management include management of mutual funds (including QDII), asset
management for corporate annuities, NSSF and specific customers, providing professional fund investment
financing services for investors. The Group also operates a number of professional investment management
platforms for private equity (PE) investment business, which provides services including management of
industrial investment funds, investment consultation, promotion and establishment of investment funds, etc.
1
Trading and institutional client services. The Group engages in providing stock sale and trading, prime
brokerage, stock borrowing and lending and stock research services in major global financial markets for
global institutional investors, as well as the issuance and market-making services for various financial
instruments such as fixed income products, currency and commodity products, futures and options, exchange
traded funds and derivatives. The trading and institutional client services of the Group are further categorised
into segments of trading business and institutional client business. The Group exerts and enhances the
advantage of synergies among business segments through investment funds and private equity projects and
focuses on exploring investment opportunities with reasonable capital returns and further expands client
relationships and promotes the overall growth of its business.
Financial leasing. The Group provides innovative financial service and solutions to individuals, enterprises
and governments, including financial leasing, operating leasing, factoring, entrusted loans and relevant
advisory services. UniTrust is the primary leasing business platform of the Group, which engages in a wide
range of industries, including infrastructure, transportation & logistics, industrials, education, health care,
construction & real estate and the chemical industry, etc. UniTrust continually sticks to the development
strategies of “One Body, Two Wings ( )”, and “One Big One Small ( )”, further clarified the
market demand and management resources under the traditional business, optimised and perfected the
corresponding supporting system and process, and promoted the specialisation and localisation of various
business units so as to improve the efficiency of business operation and the competitiveness of business in
the market. At the same time, UniTrust further explored diversified financing channels and appropriately
managed its debt structure to effectively control its capital cost and liquidity risk. It also enhanced the
comprehensive risk management system and the quantitative and qualitative analysis management functions,
laying a solid foundation for the efficient implementation of projects.
The Group conducts its overseas business primarily through Haitong International Securities (listed on the Main
Board of the Hong Kong Stock Exchange under stock code 665), a leading full-service securities firm in Hong
Kong which provides a full spectrum of financial offerings including private wealth management, corporate
finance, asset management, global markets (key businesses include sales and trading of both equity and fixed
income products, prime brokerage and risk management solutions, and research advisory) and investment
businesses as well as Haitong Bank which is previously known as BESI and is a leading investment bank in
Portuguese-speaking and Spanish-speaking regions specialised in corporate banking, investment banking and
asset management with over 20 years’ experience. By acquisition and consolidation of Haitong International
Securities and Haitong Bank, and establishment of Shanghai Pilot Free Zone Branch of Haitong Securities
(“Shanghai FTZ Branch”), the Group has established a platform to implement the “Belt and Road” initiative
and the Guangdong-Hong Kong-Macao Greater Bay Area strategy, and an industry-leading international business
platform and hence acquired first-mover advantages in the Asia-Pacific region, as well as the forward-looking
strategic reserve in Europe and the United States.
Recent Developments
Issuance of Bonds
On 7 February 2023, Haitong Securities issued the first tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB2.5 billion and a term of two years and the first tranche of corporate bonds (type II) with a
total issue size of RMB3.0 billion and a term of three years.
On 3 March 2023, Haitong Securities issued the second tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB2.5 billion and a term of two years and the second tranche of corporate bonds (type II) of 2023
with a total issue size of RMB1.7 billion and a term of three years.
On 21 March 2023, Haitong Securities issued the third tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB3.3 billion and a term of two years and the third tranche of corporate bonds (type II) of 2023
with a total issue size of RMB2.7 billion and a term of three years.
On 21 April 2023, Haitong Securities issued the fourth tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB2.0 billion and a term of two years and the fourth tranche of corporate bonds (type II) of 2023
with a total issue size of RMB4.0 billion and a term of three years.
On 20 April 2023, the Issuer issued the CNY4,000,000,000 3.40 per cent. guaranteed bonds due 2026 guaranteed
by Haitong Securities.
Competitive Strengths
The Group believes the following competitive strengths contribute to its success and distinguish the Group from
its competitors:
Full-service securities firm in the PRC with leading market positions across multiple business lines;
2
Strategically located branch network across the PRC with a substantial and stable customer base;
A pioneer in the PRC securities industry for offering new businesses;
Forward-looking overseas layout to generate great synergies and first-mover advantages;
Prudent corporate governance, effective risk management and internal control systems and stable net capital
management;
Enhancing financial strengths with outstanding business performance;
Experienced and stable management team with a highly proficient professional workforce; and
Technology-leading digital transformation at an accelerated phase.
Business Strategies
Under the background of transformation, the Group plans to continue adhering to customer focus, focusing on
intermediary businesses such as wealth management, investment banking and asset management as core
businesses; developing capital intermediary business and investment business as the wings which will draw upon
conglomeration, internationalisation and informatisation as the driving force; reinforcing the four “pillars”
including compliance and risk management, talent, IT and research. Meanwhile, the Group will enhance its
capability building in five areas including capital and investment management, investment banking underwriting
and sales pricing, assets management, institutional brokerage and sales transaction and wealth management in
order to build an intelligent Haitong. With the mission of developing a world-class investment bank, the Group
is committed to transforming Haitong into a leading domestic and globally influential modern financial services
enterprise.
Further enhance its leading market position and profitability with focus on intermediary businesses such as
wealth management, investment banking and asset management as core businesses;
Maintain the growth momentum of its investment banking business and further integrate its business
platform;
Strategically expand its asset management business to provide comprehensive product offerings to meet
increasing and diversifying customer demands;
Continue to expand and promote new businesses and products with high growth potential;
Actively pursue its internationalisation strategy to capture cross-border opportunities; and
Strengthen the risk management systems, internal controls, IT capabilities, research capabilities and talent
management to support its business operations.
STRUCTURE OF THE GROUP
The following chart sets out the Group’s simplified shareholding structure and key subsidiaries and affiliates as
at 31 December 2022.
Other A Share Other H Share
Top 10 Shareholders(1)
Shareholders Shareholders
53.53% 46.46% 0.01%
The Guarantor
100.00% 100.00% 51.00% 83.22% 100.00% 27.78% 100.00% 100.00% 100.00%
Shanghai
Haitong Shanghai Shanghai
Haitong HFT Haitong Fullgoal
Innovation Haitong Haitong Capital Weitai Zechun
Securities Investment International Fund
Securities Futures Co., Investment Property Investment &
Asset Management Holdings Management
Investment Ltd. Co., Ltd. Management Development
Management Co., Ltd. Limited Co., Ltd.
Co., Ltd. Co., Ltd. Co. Ltd.
Company Ltd.
100.00%
The Issuer
3
Note:
(1) As at 31 December 2022, the top ten shareholders of the Guarantor are HKSCC Nominees Limited (26.09%), Shanghai Guosheng
(Group) Co., Ltd. (6.60%), Shanghai Haiyan Investment Management Company Limited (4.86%), Bright Food (Group) Co., Ltd.
(3.63%), Shanghai Electric Holding Group Co., Ltd. (2.64%), Shenergy Group Company Limited (2.47%), China Securities Finance
Corporation Limited (1.98%), Shanghai Guosheng Group Assets Co., Ltd. (1.82%), Shanghai Jiushi (Group) Co., Ltd. (1.80%),
Shanghai Bailian Group Co., Ltd., (1.64%), among which, Shanghai Guosheng (Group) Co., Ltd. and its wholly-owned subsidiary,
Shanghai Guosheng Group Assets Co., Ltd., hold a total of 1,356.3275 million A Shares and H Shares of the Guarantor, representing
approximately 10.38% of the total share capital of the Guarantor. Save for Shanghai Guosheng (Group) Co., Ltd. (together with its
subsidiaries, the “Guosheng Group”), no shareholder directly held more than 5% of the shares of the Guarantor (excluding HKSCC
Nominees Limited). HKSCC Nominees Limited held the H Shares on behalf of the non-registered shareholders.
4
SUMMARY OF THE PROGRAMME
The following is a brief summary of the programme and is qualified in its entirety by the remainder of this
Offering Circular. Some of the terms described below are subject to important limitations and exceptions. Words
and expressions defined in “Terms and Conditions of the Notes” shall have the same meanings in this summary.
For a more complete description of the terms and conditions of the Notes, see “Terms and Conditions of the
Notes” in this Offering Circular.
Issuer Haitong International Finance Holdings Limited.
Guarantor Haitong Securities Co., Ltd. ( ).
Description Guaranteed Medium Term Note Programme unconditionally and
irrevocably guaranteed by the Guarantor.
Size Up to U.S.$1,000,000,000 (or the equivalent in other currencies at the
date of issue) aggregate principal amount of Notes outstanding at any one
time. The Issuer and the Guarantor may increase the aggregate principal
amount of the Programme in accordance with the terms of the Dealer
Agreement.
Risk Factors Investing in the Notes issued under the Programme involves certain risks.
The principal risk factors that may affect the abilities of the Issuer and the
Guarantor to fulfil their respective obligations in respect of the Notes and
the Guarantee are discussed under “Risk Factors”.
Arrangers and Dealers Haitong International Securities Company Limited and Haitong Bank,
Macau Branch.
The Issuer and the Guarantor may from time to time terminate the
appointment of any Dealer under the Programme or appoint Dealers either
in respect of one or more Tranches or in respect of the whole Programme.
References in this Offering Circular to “Dealers” are to all persons
appointed as a dealer in respect of one or more Tranches or the
Programme.
Certain Restrictions Each issue of Notes denominated in a currency in respect of which
particular laws, guidelines, regulations, restrictions or reporting
requirements apply will only be issued in circumstances which comply
with such laws, guidelines, regulations, restrictions or reporting
requirements from time to time (see “Subscription and Sale”). Further
restrictions may apply in connection with any particular Series or
Tranches of Notes.
Trustee Citicorp International Limited.
Issuing and Paying Agent Citibank, N.A., London Branch.
Registrar Citicorp International Limited.
Non-CMU Paying Agent Citibank, N.A., London Branch.
Non-CMU Transfer Agent Citibank, N.A., London Branch.
CMU Transfer Agent Citicorp International Limited.
5
Calculation Agent Citibank, N.A., London Branch (for Notes cleared through
Euroclear/Clearstream); Citicorp International Limited (for Notes cleared
through the CMU).
CMU Lodging and Paying Agent Citicorp International Limited.
Method of Issue The Notes will be issued on a syndicated or non-syndicated basis. The
Notes will be issued in series (each a “Series”) in one or more tranches
(each a “Tranche”) on the same or different issue dates. The specific
terms of each Tranche (which will be completed, where necessary, with
the relevant terms and conditions and, save in respect of the Issue Date,
the issue price, the first payment of interest on them, principal amount of
the Tranche, the timing for submission of the NDRC Post-issue Filing and
other NDRC Filings (if applicable) and the timing for completion of the
Cross-border Security Registration and the giving of consequential
notices thereof, will be identical to the terms of other Tranches of the
same Series) will be completed in the Pricing Supplement.
Issue Price The Notes may be issued at their principal amount or at a discount or
premium to their principal amount. Partly Paid Notes may be issued, the
issue price of which will be payable in two or more instalments.
Form of Notes The Notes may be issued in bearer or registered form as described in
“Terms and Conditions of the Notes”. Registered Notes will not be
exchangeable for Bearer Notes and vice versa.
Each Tranche of Bearer Notes will initially be in the form of either a
temporary Global Note or a permanent Global Note, in each case as
specified in the relevant Pricing Supplement.
Each Tranche of Registered Notes will initially be represented by a
Global Certificate.
Where TEFRA D (as defined below) is applicable, Bearer Notes must
initially be issued in the form of a temporary Global Note, exchangeable
for permanent Global Notes or Definitive Notes upon certification of
non-U.S. beneficial ownership.
Clearing Systems Clearstream, Euroclear, the CMU and, in relation to any Tranche, any
additional or alternative clearing system selected by the Issuer and the
Guarantor, and approved in writing by the Trustee, the Issuing and Paying
Agent or, as the case may be, the CMU Lodging and Paying Agent and,
where relevant, the Registrar.
Initial Delivery of Notes On or before the issue date for each Tranche, the Global Note or Global
Certificate representing the Notes may be deposited with a common
depositary for Euroclear and Clearstream or deposited with a sub-
custodian for the HKMA as operator of the CMU. Global Notes or Global
Certificates may also be deposited with any other clearing system or may
be delivered outside any clearing system provided that the method of such
delivery has been agreed in advance by the Issuer, the Guarantor, the
Trustee, the Issuing and Paying Agent and the relevant Dealer(s).
Registered Notes that are to be credited to one or more clearing systems
on issue will be registered in the name of, or in the name of nominees or
a common nominee for, such clearing systems.
6
Currencies Subject to compliance with all relevant laws, regulations and directives,
Notes may be issued in any currency agreed between the Issuer, the
Guarantor and the relevant Dealer(s).
Maturities Subject to compliance with all relevant laws, regulations and directives,
any maturity as may be agreed between the Issuer, the Guarantor and the
relevant Dealer(s).
Specified Denomination Definitive Notes will be in such denominations as may be specified in the
relevant Pricing Supplement, subject to compliance with all relevant
laws, regulations and directives. Unless otherwise permitted by the
then-current laws and regulations, Notes (including Notes denominated in
sterling) which have a maturity of less than one year and in respect of
which the issue proceeds are to be accepted by the Issuer in the United
Kingdom or the activity of issuing the Notes is carried on from an
establishment maintained by the Issuer in the United Kingdom or whose
issue otherwise constitutes a contravention of section 19 of the Financial
Services and Markets Act 2000 (“FSMA”) will have a minimum
denomination of 100,000 (or its equivalent in other currencies).
Interest The Notes may be interest-bearing or non-interest bearing. Interest (if
any) may accrue at a fixed rate or a floating rate or other variable rate and
the method of calculating interest may vary between the issue date and
the maturity date of the relevant Series.
Fixed Rate Notes Fixed interest will be payable in arrear on such date or dates as may be
agreed between the Issuer, the Guarantor and the relevant Dealer(s) and
on redemption and will be calculated on the basis of such Day Count
Fraction as may be agreed between the Issuer, the Guarantor and the
relevant Dealer(s).
Floating Rate Notes Floating Rate Notes will bear interest determined separately for each
Series as follows:
on the same basis as the floating rate under a notional interest rate
swap transaction in the relevant Specified Currency governed by an
agreement incorporating (i) the 2006 ISDA Definitions (as
published by the International Swaps and Derivatives Association,
Inc. and as amended and updated as at the Issue Date of the first
Tranche of the Notes of the relevant Series); or (ii) the latest version
of the 2021 ISDA Interest Rate Derivatives Definitions, including
any Matrices referred to therein, as published by ISDA as at the
Issue Date of the first Tranche of the Notes of the relevant Series;
or
by reference to SOFR, EURIBOR, HIBOR or CNH HIBOR (or such
other benchmark as may be specified in the relevant Pricing
Supplement) as adjusted for any applicable margin; or
on such other basis as may be agreed between the Issuer, the
Guarantor and the relevant Dealer(s).
Interest periods will be specified in the relevant Pricing Supplement.
7
Zero Coupon Notes Zero Coupon Notes (as defined in “Terms and Conditions of the Notes”)
may be issued at their principal amount or at a discount to it and will not
bear interest.
Dual Currency Notes Payments (whether in respect of principal or interest and whether at
maturity or otherwise) in respect of Dual Currency Notes (as defined in
the “Terms and Conditions of the Notes”) will be made in such currencies,
and based on such rates of exchange, as the Issuer, the Guarantor and the
relevant Dealer(s) may agree and as may be specified in the relevant
Pricing Supplement.
Interest Periods and Interest The length of the interest periods for the Notes and the applicable interest
Rates rate or its method of calculation may differ from time to time or be
constant for any Series. Floating Rate Notes may also have a maximum
interest rate, a minimum interest rate, or both. The use of interest accrual
periods permits the Notes to bear interest at different rates in the same
interest period. All such information will be set out in the relevant Pricing
Supplement.
Redemption The relevant Pricing Supplement will specify the basis for calculating the
redemption amounts payable (detailed in a formula or otherwise). Unless
permitted by then-current laws and regulations, the Notes (including the
Notes denominated in sterling) which have a maturity of less than one
year and in respect of which the issue proceeds are to be accepted by the
Issuer in the United Kingdom or the activity of issuing the Notes is
carried on from an establishment maintained by the Issuer in the United
Kingdom or whose issue otherwise constitutes a contravention of section
19 of FSMA must have a minimum redemption amount of 100,000 (or
its equivalent in other currencies).
Optional Redemption The Notes may be redeemed before their stated maturity at the option of
the Issuer (either in whole or in part) and/or the Noteholders to the extent
(if at all) specified in the relevant Pricing Supplement as further described
in Condition 6(e) (Redemption at the Option of the Issuer (Call Option))
and Condition 6(f) (Redemption at the Option of Noteholders (Put
Option)), respectively, of the Terms and Conditions of the Notes.
Redemption for Relevant Events At any time following the occurrence of a Relevant Event, the holder of
any Note will have the right, at such Noteholder’s option, to require the
Issuer to redeem all but not some only of that holder’s Note at 101 per
cent. (in the case of a redemption for a Change of Control) or 100 per
cent. (in the case of a redemption for a No Registration Event) of their
principal amount or such other amount as may be specified in the relevant
Pricing Supplement, together in each case with any accrued and unpaid
interest, as further described in Condition 6(d) (Redemption for Relevant
Events) of the Terms and Conditions of the Notes.
Redemption for Taxation Reasons The Notes may be redeemed at the option of the Issuer prior to maturity
for taxation reasons as further described in Condition 6(c) (Redemption
for Taxation Reasons) of the Terms and Conditions of the Notes.
8
Status of Notes The Notes and any Receipts and Coupons relating to them will constitute
direct, unsubordinated, unconditional and unsecured obligations of the
Issuer and shall at all times rank pari passu and without any preference
or priority among themselves. The payment obligations of the Issuer
under the Notes and the Receipts and the Coupons relating to them shall,
save for such exceptions as may be provided by mandatory provisions of
applicable laws and regulation, at all times rank at least equally with all
its other present and future unsecured and unsubordinated obligations.
Status of the Guarantee The obligations of the Guarantor under the Guarantee shall, save for such
exceptions as may be provided by mandatory provisions of applicable
laws and regulation, at all times rank at least equally with all its other
present and future unsecured and unsubordinated obligations.
Cross-Acceleration The Terms and Conditions of the Notes will contain a cross-acceleration
provision as described in Condition 9(c) (Cross-Acceleration) of the
Terms and Conditions of the Notes.
Taxation All payments of principal, premium (if any) and interest by or on behalf
of the Issuer or the Guarantor in respect of the Notes, the Receipts,
Coupons or under the Guarantee shall be made free and clear of, and
without set-off or counterclaim and without withholding or deduction for
or on account of, any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected,
withheld or assessed by or within the British Virgin Islands or the PRC or,
in each case, any political subdivision or authority therein or thereof
having power to tax, unless such withholding or deduction is required by
law. The Issuer (or the Guarantor, as the case may be) will, subject to
certain customary exceptions, pay such additional amounts as will result
in the receipt by the Noteholders, Receiptholders or Couponholders of
such amounts as would have been received by them had no such
withholding or deduction been required, as further described in Condition
8 (Taxation) of the Terms and Conditions of the Notes.
Governing Law English law.
Jurisdiction Exclusive jurisdiction of the Hong Kong courts.
Listing and Admission to Trading Application has been made to the Hong Kong Stock Exchange for the
listing of the Programme by way of debt issues to Professional Investors
only within the 12-month period after the date of this Offering Circular
on the Hong Kong Stock Exchange.
However, unlisted Notes and Notes to be listed, traded or quoted on or by
any other competent authority, stock exchange or quotation system may
be issued pursuant to the Programme. The relevant Pricing Supplement in
respect of the issue of any Notes will specify whether or not such Notes
will be listed on the Hong Kong Stock Exchange or listed, traded or
quoted on or by any other competent authority, exchange or quotation
system.
9
Selling Restrictions There are restrictions on the offer, sale and transfer of the Notes in the
United States, the EEA, the United Kingdom, Hong Kong, Singapore,
Japan, the PRC, the British Virgin Islands and Macau and such other
restrictions as may be required in connection with the offering and sale of
a particular Tranche of Notes, see “Subscription and Sale”.
Bearer Notes will be issued in compliance with rules in substantially the
same form as U.S. Treasury Regulations §1.163-5(c)(2)(i)(D) for
purposes of Section 4701 of the U.S. Internal Revenue Code of 1986, as
amended (the “Code”) (“TEFRA D”) unless (i) the relevant Pricing
Supplement states that the Bearer Notes are issued in compliance with
rules in substantially the same form as U.S. Treasury Regulation
§1.163-5(c)(2)(i)(C) for purposes of Section 4701 of the Code
(“TEFRA C”) or (ii) the Bearer Notes are issued other than in compliance
with TEFRA D or TEFRA C. In the case of Bearer Notes, only Notes with
a term of 365 days or less (taking into account any unilateral extensions
and rollovers) will be issued other than in compliance with TEFRA D or
TEFRA C and will be referred to in the relevant Pricing Supplement as a
transaction to which the United States Tax Equity and Fiscal
Responsibility Act of 1982 (“TEFRA”) is not applicable. Bearer Notes
with a term of more than 365 days (taking into account any unilateral
extensions and rollovers) that are held through the CMU must be issued
in compliance with TEFRA C, unless at the time of issuance the CMU and
CMU Lodging and Paying Agent have procedures in place so as to enable
the Issuer to comply with the certification requirements under TEFRA D.
Ratings S&P has assigned a corporate rating of “BBB” with a stable outlook to the
Guarantor. Such rating is only correct as at the date of this Offering
Circular. The Programme is expected to be rated “BBB” by S&P.
Tranches of Notes will be rated or unrated. Where a Tranche of Notes is
to be rated, such rating will be specified in the relevant Pricing
Supplement. A rating is not a recommendation to buy, sell or hold
securities, does not address the likelihood or timing of prepayment and
may be subject to revision, qualification, suspension or withdrawal at any
time by the assigning rating organisation.
LEI 254900HGXUILEFY9XQ36.
10
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth the summary consolidated financial information of the Group as at and for the
periods indicated.
The summary consolidated financial information of the Group as at and for the years ended 31 December 2020,
2021 and 2022 set forth below is derived from and should be read in conjunction with the Guarantor’s Audited
Consolidated Financial Statements, included elsewhere in this Offering Circular. The Guarantor’s Audited
Consolidated Financial Statements were prepared and presented in accordance with IFRS and have been audited
by PwC, the independent auditor of the Guarantor, in accordance with the International Standards on Auditing.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Revenue
Commission and fee income 17,387,414 18,762,734 14,668,674
Interest income 13,975,952 15,625,976 17,514,777
Finance lease income 3,932,863 3,336,406 2,302,792
Investment income and gains (net) 11,076,986 10,678,856 (1,034,439)
46,373,215 48,403,972 33,451,804
Other income and gains 7,903,985 9,405,589 8,528,417
Total revenue, gains and other income 54,277,200 57,809,561 41,980,221
Commission and fee expenses (3,535,266) (3,770,637) (3,083,635)
Interest expenses (13,018,271) (12,341,619) (13,607,710)
Depreciation and amortisation (1,363,882) (1,569,341) (1,581,428)
Staff costs (7,656,682) (9,025,250) (5,785,269)
Impairment losses under expected credit loss model (4,586,225) (3,351,674) (1,665,649)
Impairment losses on other assets (10,923) (499,168) (65,121)
Other expenses (8,891,658) (10,357,962) (8,978,954)
Total expenses (39,062,907) (40,915,651) (34,767,766)
Share of results of associates and joint ventures 543,017 1,649,889 786,581
Profit before income tax 15,757,310 18,543,799 7,999,036
Income tax expense (3,720,081) (4,795,937) (2,802,886)
Profit for the year 12,037,229 13,747,862 5,196,150
Attributable to:
Shareholders of the Company 10,875,396 12,826,517 6,545,347
Non-controlling interests 1,161,833 921,345 (1,349,197)
12,037,229 13,747,862 5,196,150
Earnings per share (Expressed in RMB per share)
Basic 0.90 0.98 0.50
Diluted 0.90 0.98 0.50
11
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
For the year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Profit for the year 12,037,229 13,747,862 5,196,150
Other comprehensive income:
Items that will not be reclassified subsequently
to profit or loss:
Actuarial gains/(losses) on defined benefit obligations (340) 39,131 80,357
Fair value (losses)/gains on equity instruments measured
at fair value through other comprehensive income 268,174 (446,507) (1,553,088)
Income tax impact (71,531) 108,150 320,322
Subtotal 196,303 (299,226) (1,152,409)
Items that will be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign operations (652,140) (739,071) 563,156
Fair value gains/(losses) on hedging instrument
designated in cash flow hedges (74,696) 94,909 45,520
Fair value gains/(losses) on hedges of net investments in
foreign operations (293,331) 243,987 611,247
Fair value gains/(losses) on debt instruments measured
at fair value through other comprehensive income
– Net fair value changes during the year (183,103) 270,696 (110,934)
– Reclassification adjustment to profit or loss
on disposal (51,587) 82,732 (83,883)
– Reclassification adjustment to profit or loss
for expected credit loss 259,494 83,512 (63,908)
– Income tax relating to components of other
comprehensive income (4,392) (86,644) 43,913
Share of other comprehensive income of associates
and joint ventures, net of related income tax (34,727) (2,193) 8,336
Subtotal (1,034,482) (52,072) 1,013,447
Other comprehensive income for the year (net of tax) (838,179) (351,298) (138,962)
Total comprehensive income for the year 11,199,050 13,396,564 5,057,188
Attributable to:
Shareholders of the Company 11,090,942 12,932,504 5,285,587
Non-controlling interests 108,108 464,060 (228,399)
11,199,050 13,396,564 5,057,188
Total comprehensive income for the period attributable
to shareholders of the company arises from:
Continuing operations 11,226,584 13,396,313 5,052,909
Discontinued operations (27,534) 251 4,279
11,199,050 13,396,564 5,057,188
12
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Non-current assets
Property and equipment 15,109,289 15,088,876 17,016,634
Right-of-use assets 1,811,328 1,778,639 1,710,529
Investment properties 111,592 57,595 2,641,590
Goodwill 3,884,910 3,365,313 3,676,231
Other intangible assets 551,964 531,391 570,006
Investments accounted for using equity method 4,428,307 6,454,420 7,013,714
Finance lease receivables 20,751,276 11,270,189 7,102,583
Receivables arising from sale and leaseback
arrangements 20,132,302 31,521,846 47,847,820
Equity instruments at fair value through other
comprehensive income 16,239,187 10,246,871 6,096,319
Debt instruments at fair value through other
comprehensive income 11,873,648 33,050,889 45,975,346
Debt instruments measured at amortised cost 2,241,831 3,626,108 5,437,086
Financial assets at fair value through profit or loss 26,145,088 25,132,195 25,043,377
Financial assets held under resale agreements 2,195,793 575,403 50,071
Other loans and receivables 3,235,445 2,394,396 2,518,564
Loans and advances 2,775,492 4,119,086 5,031,733
Deferred tax assets 4,282,160 5,171,925 4,709,952
Deposits with exchanges 166,688 163,245 199,937
Restricted bank balances and cash 1,288,296 1,503,454 1,769,482
Other non-current assets 996,613 1,891,358 3,101,022
Total non-current assets 138,221,209 157,943,199 187,511,996
Current assets
Advances to customers on margin financing 73,067,592 75,223,404 67,843,871
Accounts receivable 8,410,000 11,372,016 10,394,515
Finance lease receivables 27,660,127 22,202,398 12,355,870
Receivables arising from sale and leaseback
arrangements 15,082,174 23,566,177 36,702,132
Debt instruments at fair value through other
comprehensive income 1,234,515 4,002,056 6,876,553
Debt instruments measured at amortised cost 1,521,668 1,099,101 369,071
Financial assets at fair value through profit or loss 194,251,416 195,277,554 184,555,352
Derivative financial assets 1,837,912 1,084,731 1,477,167
Financial assets held under resale agreements 55,769,601 39,185,614 32,595,078
Other loans and receivables 16,884,562 12,544,269 4,209,604
Loans and advances 1,044,635 593,565 837,281
Other current assets 3,446,643 6,242,087 6,748,623
Placements to banks and other financial institutions 22,619 352,928 274,445
Deposits with exchanges 17,208,163 17,491,923 22,664,637
Clearing settlement funds 11,852,301 16,765,418 21,380,695
Deposits with central banks 3,716,130 3,304,209 3,245,096
Deposits with other banks 258,664 226,337 172,872
Bank balances and cash 122,583,420 156,448,163 153,392,719
Total current assets 555,852,142 586,981,950 566,095,581
Total assets 694,073,351 744,925,149 753,607,577
Current liabilities
Borrowings 59,132,650 48,402,335 56,864,912
Short-term financing bills payables 25,718,523 24,986,688 16,159,094
Bonds payable 36,233,688 52,513,925 60,153,220
Accounts payable to brokerage clients 108,167,568 123,202,200 115,513,463
13
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Customer accounts 4,413,388 2,758,837 3,784,565
Contract liabilities 131,039 156,746 25,969
Other payables and accruals 21,187,155 28,635,826 21,262,810
Lease liabilities 352,544 307,759 279,881
Provisions 141,084 203,800 201,705
Income tax liabilities 2,986,567 3,477,590 1,727,757
Financial liabilities at fair value through profit or loss 22,226,074 10,456,105 5,478,358
Derivative financial liabilities 2,672,279 1,548,316 898,419
Financial assets sold under repurchase agreements 60,563,433 91,911,952 101,694,357
Placements from banks and other financial institutions 12,059,685 12,723,438 3,218,363
Deposits from central banks 887,565 155,411 2,133,219
Deposits from other banks 63,104 72,787 –
Total current liabilities 356,936,346 401,513,715 389,396,092
Net current assets 198,915,796 185,468,235 176,699,489
Total assets less current liabilities 337,137,005 343,411,434 364,211,485
Non-current liabilities
Long-term payables 8,005,920 6,230,344 5,508,164
Deferred tax liabilities 698,134 1,320,651 909,459
Customer accounts – 3,185,654 1,533,910
Long-term borrowings 33,597,907 30,751,726 33,951,333
Bonds payable 111,604,522 111,072,145 121,677,698
Deposits from central banks – 2,150,202 81,911
Other payables and accruals 1,382,286 1,405,175 1,723,273
Financial liabilities at fair value through profit or loss 10,012,227 5,860,112 17,410,122
Lease liabilities 699,869 739,420 735,819
Placements from banks and other financial institutions 3,009,828 2,941,219 3,057,738
Total non-current liabilities 169,010,693 165,656,648 186,589,427
Total liabilities 525,947,039 567,170,363 575,985,519
Equity
Share capital 13,064,200 13,064,200 13,064,200
Capital reserve 74,888,284 74,913,916 75,007,559
Revaluation reserve 282,378 305,179 (624,143)
Translation reserve (932,948) (962,857) (993,170)
General reserves 24,924,156 28,313,210 31,438,374
Retained earnings 41,222,398 47,504,316 46,699,137
Equity attributable to shareholders the company 153,448,468 163,137,964 164,591,957
Non-controlling interests 14,677,844 14,616,822 13,030,101
Total equity 168,126,312 177,754,786 177,622,058
Total equity and liabilities 694,073,351 744,925,149 753,607,577
14
RISK FACTORS
An investment in the Notes is subject to a number of risks. Investors should carefully consider all of the
information in this Offering Circular and, in particular, the risks described below, before deciding to invest in
the Notes. The following describes some of the significant risks relating to the Issuer, the Guarantor the Group,
the Group’s business, the market in which the Group operates and the value of Notes. PRC laws and regulations
may differ from the laws and regulations in other countries. Some risks may be unknown to the Issuer, the
Guarantor or the Group and other risks, currently believed to be immaterial, could in fact be material. Any of
these could materially and adversely affect the business, financial condition, results of operations or prospects
of the Issuer, the Guarantor and the Group or the value of the Notes. Each of the Issuer and the Guarantor
believes that the risk factors described below represent the principal risks inherent in investing in the Notes, but
the ability of the Issuer or the Guarantor, as the case may be, to pay interest, principal or other amounts on or
in connection with any Notes may be affected by some factors that may not be considered as significant risks by
the Issuer or the Guarantor on information currently available to them or which they are currently unable to
anticipate. All of these factors are contingencies which may or may not occur and the Issuer, the Guarantor or
the Group is not in a position to express a view on the likelihood of any such contingency occurring. This
Offering Circular also contains forward-looking statements that involve risks and uncertainties. The actual
results of the Group could differ materially from those anticipated in these forward-looking statements as a result
of certain factors, including the risks described below and elsewhere in this Offering Circular.
The Issuer, the Guarantor or the Group does not represent that the statements below regarding the risk factors
of the Issuer, the Guarantor, the Group, the Notes and the Guarantee are exhaustive. Prospective investors should
also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior
to making any investment decision.
RISKS RELATING TO THE GROUP’S BUSINESS AND THE PRC SECURITIES INDUSTRY
General economic and market conditions could materially and adversely affect the business of the Group.
Substantially all of the revenue of the Group is derived from the securities markets. Like other businesses
operating in the same industry, its business is directly affected by the inherent risks associated with the securities
markets, such as market volatility, fluctuations in the trading volume and the credit capacity or perceived credit
worthiness of the securities industry in the marketplace. For instance, the PRC stock market has experienced
significant fluctuations in recent years and there can be no assurance that such volatility would not continue in
the future. The Group’s business is also subject to general economic and political conditions, such as
macroeconomic and monetary policies, legislation and regulations affecting the financial and securities
industries, upward and downward trends in the business and financial sectors, inflation, currency fluctuations,
availability of short-term and long-term market funding sources, cost of funding and the level and volatility of
interest rates. For instance, the unfavourable economic and financial conditions globally, such as financial
instability in the U.S. and the imposition of new bilateral tariffs between China and the U.S. have also had a
material impact on the market conditions in China and may affect the Group’s results and financial conditions.
China’s securities industry and the Group’s results of operations are affected by the monetary policies and
inflation in the PRC and the volatility in the PRC securities markets. There is also substantial uncertainty relating
to the impact of the United Kingdom’s withdrawal from the European Union on the economic conditions of other
part of the world, such as the PRC’s, including but not limited to further decreases in global stock exchange
indices, increased foreign exchange volatility (in particular a further weakening of the pound sterling and euro
against other leading currencies) and a possible economic recession involving more countries and areas.
Widespread reductions in consumption, industrial production and business activities arising from the COVID-19
pandemic have significantly disrupted the global economy and have led to significant volatility in the global
markets across all asset classes, including stocks, bonds, oil and other commodities and this volatility may persist
for some time.
Turmoil in the financial markets, a downturn in general economic conditions or other risks associated with the
business of the Group and the securities industry in general could reduce securities trading and corporate finance
activities and affect the value of certain financial assets, which may consequently have a material adverse effect
on the Group’s commission and fees from wealth management, investment banking and asset management
businesses, as well as the returns on financial assets and investments of the Group. A reduction in the Group’s
income or a loss resulting from its underwriting, investments, trading or financial leasing activities could have
a material adverse effect on its business, financial condition and results of operations. As a result of these risks,
the Group’s income and operating results may be exposed to significant fluctuations.
15
The Group faces intense competition and its business could be materially and adversely affected if it were
unable to compete effectively.
The PRC securities industry is highly competitive, and the Group faces intense competition in most of its
business lines. For its wealth management business, the Group competes primarily with other PRC securities
firms in terms of pricing and the range of products and services offered. As at 31 December 2022, there are 140
registered securities firms in the PRC according to CSRC. The intense price competition in recent years may
result in lower commission rates for the securities brokerage business of the Group. Please see “Risk Factors –
Risks Relating to the Group’s Business and the PRC Securities – The wealth management business, especially
the securities and futures brokerage business, of the Group is subject to various risks and there is no guarantee
that its brokerage commission and fee income can be sustained.”
For its investment banking business, the Group competes primarily with other PRC and Sino-foreign joint
venture securities firms as well as PRC commercial banks in terms of brand recognition, marketing and
distribution capability, service quality, financial strength and pricing. Intense competition may result in lower
underwriting and advisory fees for the investment banking business of the Group. Please see “Risk Factors –
Risks Relating to the Group’s Business and the PRC Securities – The investment banking business of the Group
is subject to various risks in the underwriting and sponsorship of securities and there is no guarantee that its
underwriting and sponsors fees can be sustained.”
For its asset management business, the Group competes primarily with fund management companies, banks,
insurance companies and other financial institutions in the PRC in terms of the range of products and services
offered, pricing and quality of customer service. For its trading and institutional client services business, the
Group competes primarily with other PRC securities firms.
In January 2014, the acquisition by the Group of UT Capital Group was completed, marking the Group’s entrance
into the financial leasing industry. The acquisition of UT Capital Group provides the Group with growth
potentials and substantial synergies with its existing businesses, while on the other hand subjects the Group to
risks associated with the financial leasing industry. For details, please see “Risk Factors – Risks Relating to the
Group’s Business and the PRC Securities – The financial leasing business of the Group is subject to various risks
and there is no guarantee that the financial leasing business can maintain rapid growth in the future.”
Some of the competitors of the Group may have certain competitive advantages over the Group, including greater
financial resources, stronger brand recognition, broader product and service offerings, more advanced IT systems
and a branch network with wider geographic coverage. They may also have more experience with a broader range
of services and more complex financial products than the Group does.
In addition, as the Measures for the Administration of Foreign-Funded Securities Companies has taken effect in
April 2018 and amended in 2020 in the PRC to further open the securities market of the PRC, foreign investors
are allowed to control foreign-funded securities companies. With such regulatory changes, more competitors are
seeking to enter, or expand in, the PRC securities industry. The Group believes that the PRC securities industry
and financial services industry are becoming increasingly competitive, and its failure to remain competitive will
have a material adverse effect on its business, financial condition, results of operations and prospects.
The wealth management business, especially the securities and futures brokerage business, of the Group
is subject to various risks and there is no guarantee that its brokerage commission and fee income can be
sustained.
Wealth management revenue represents a significant portion of the revenue of the Group. For the years ended
31 December 2020, 2021 and 2022, segment revenue from the wealth management business of the Group
(excluding inter-segment revenue) amounted to RMB15,995.7 million, RMB17,491.5 million and RMB15,253.3
million, respectively, representing 29.5%, 30.3% and 36.3% of its total revenue, gains and other income,
respectively. For the year ended 31 December 2020, 2021 and 2022, securities, futures and options dealing and
broking fee income amounted to RMB8,549.4 million, RMB9,668.8 million and RMB7,645.3 million,
respectively, representing 15.8%, 16.7% and 18.2% of its total revenue, gains and other income, respectively.
16
The securities and futures brokerage business in the wealth management business segment of the Group is
affected by external factors such as general economic conditions, macroeconomic and monetary policies, market
conditions and fluctuations in interest rates, all of which are beyond its control. For example, in 2022, A-share
market underwent significant fluctuations in general. The SSE Composite Index, the SZSE Component Index and
the ChiNext Price Index plunged 15.13%, 25.85% and 29.37%, respectively in 2022. According to Shanghai and
Shenzhen stock exchanges, the trading volume of stocks and funds in the SSE and SZSE amounted to
RMB495.34 trillion in 2022, down by 10.36% year-on-year. The scale of margin financing and securities lending
also shrinked in fluctuations and the balance of which as of the end of 2022 was RMB1.54 trillion, representing
a decrease of 15.93% as compared to the end of last year. There can be no assurance that such unfavourable
economic and market conditions will not recur in the future.
With the two-way opening up and liberation of the capital market, the Group believes that the PRC securities
industry will become increasingly competitive along with the entry of foreign-invested as well as the wholly
foreign-owned securities companies. Therefore, the competition may increase and there is no guarantee that it
would not further lower the brokerage commission rates in order to stay competitive. As a result, there is no
guarantee that its brokerage commission and fee income can be sustained at current levels.
The investment banking business of the Group is subject to various risks in the underwriting and
sponsorship of securities and there is no guarantee that its underwriting and sponsors fees can be
sustained.
For the years ended 31 December 2020, 2021 and 2022, revenue from the investment banking business of the
Group amounted to RMB6,080.2 million, RMB5,715.9 million and RMB4,651.2 million, respectively,
representing 11.2%, 9.9% and 11.1% of the total revenue, gains and other income, respectively.
The investment banking business of the Group is subject to certain risks related to the uncertainties in regulatory
policies and approvals. The primary offering of securities in the PRC, especially an IPO, secondary offerings and
certain types of M&A of listed companies, is subject to a merit-based review and approval process conducted by
various regulatory authorities. The result and timing of these reviews are beyond the control of the Group and
may cause substantial delays to, or the termination of, securities offerings it underwrites and sponsors. There is
no guarantee that such approvals will be granted in a timely manner or at all in the future. A significant decline
in the approval rate of the securities offerings the Group sponsors could harm its reputation, erode client
confidence and reduce its underwriting and sponsors fee income, because the Group receives most of its fees only
after the successful completion of a securities offering. In addition, the performance of the investment banking
business of the Group also depends on market conditions. Adverse market conditions and capital market volatility
may also cause delays to, or the termination of, securities offerings the Group underwrites and sponsors or may
result in fewer financing and M&A activities, which may in turn materially and adversely affect the Group’s
revenue from the investment banking business.
In addition, the investment banking business of the Group is subject to certain risks related to the underwriting
of securities, and substantial capital market volatility may cause the securities that the Group underwrites to be
undersubscribed. Since the Group may underwrite securities offerings on a firm commitment basis, it would then
be required to purchase some or the entire unsubscribed portion for its own account, which would materially and
adversely affect its liquidity. After trading begins, if the Group sells the securities on its own account to investors
below the offer price at which it was committed to purchase, it would incur losses on the sales of those securities.
Intensifying price competition in investment banking business from other PRC or Sino-foreign joint venture
securities firms may force the Group to charge a lower underwriting fee rate to stay competitive. This could cause
the underwriting and sponsors fees of the Group to be reduced, which could materially and adversely affect its
business, financial condition and results of operations. As a result, there is no guarantee that the Group’s
underwriting and sponsors fees can be sustained at current levels.
Besides, when acting as a sponsor in the underwriting of securities, the Group may be subject to regulatory
sanctions, fines, penalties or other disciplinary actions in the PRC for conducting inadequate due diligence in
connection with an offering, fraud or misconduct committed by issuers, their agents, other sponsors or itself,
misstatements and omissions in disclosure documents, or other illegal or improper activities that occur during the
course of the underwriting process. Please see “Risk Factors – Risks Relating to the Group’s Business and the
PRC Securities – The Group may be subject to litigation and regulatory investigations and proceedings and may
not always be successful in defending itself against such claims or proceedings.” Moreover, according to the
17
rules in China, if the prospectus of the IPOs sponsored by the Group contains fraudulent records, misstatements
or omissions which cause losses to investors, the Group may be required to compensate investors for their losses
resulting from false disclosures in IPOs before issuers’ compensation liability can be determined. The due
diligence that the Group undertakes in the course of its investment banking business operations is inherently
limited and may not reveal all facts that may be relevant in connection with such businesses.
Furthermore, as the PRC regulatory requirements towards the primary offering of securities continue to reform,
including the reform of the A-share IPO system from an approval-based to a registration-based system, securities
firms in China are facing increasing challenges in terms of deal execution, client development, pricing and
distribution capabilities. If the Group is unable to adjust its business strategies to meet these new challenges, it
may not be able to compete effectively in the securities industry, which could in turn materially and adversely
affect income from its investment banking business.
A significant decline in the size of the Group’s AUM, fee rate or poor management performance may
materially and adversely affect the asset management business of the Group.
For the years ended 31 December 2020, 2021 and 2022, segment revenue from the asset management business
of the Group amounted to RMB4,201.0 million, RMB4,148.9 million and RMB2,858.1 million, respectively,
representing 7.7%, 7.2% and 6.8%, of its total revenue, gains and other income, respectively.
The Group receives asset management fees based on the value of its customer portfolios or investment in funds
managed by it. In addition, the Group also provides private equity fund management, collective asset
management and targeted asset management schemes in which the Group may also earn performance fees.
Market volatility, adverse economic conditions or the failure to outperform its competitors or the market may
reduce the Group’s AUM or affect the performance of the assets or funds it manages, which could adversely
affect the amount of management fees or performance fees it receives.
In addition, with the release of Guidance Opinions Concerning Standardisation of Asset Management Operations
by Financial Institutions in April 2018 (the “New Asset Management Regulations”), financial institutions in
China are required to deleverage their business and reduce channel-based services. Under these tightening
requirements, the Group’s asset management business is under more stringent regulatory scrutiny, which may
result in additional downside pressure for the Group to expand its AUM. Furthermore, the transitional period set
under the New Asset Management Regulations has expired in 2021. In line with the principles and guidance of
the New Asset Management Regulations, market players in the “general asset management” segment expanded
steadily and the market competition has become increasingly intense, and therefore the failure of the Group to
remain competitive may materially and adversely affect income from its asset management business.
The trading and institutional client services business of the Group is subject to market volatility and its
investment decisions.
For the years ended 31 December 2020, 2021 and 2022, segment revenue from the trading and institutional client
services business of the Group amounted to RMB14,449.1 million, RMB15,667.3 million and RMB4,464.9
million, respectively, representing 26.6%, 27.1% and 10.6%, of its total revenue, gains and other income,
respectively.
The Group trades equity and fixed income securities as well as derivative products for its own account. The
equity and fixed income securities of the Group are subject to market volatility and, therefore, the results of its
securities trading activities generally correlate with the performance of the PRC securities markets. The Group
also engages in derivative transactions involving ETFs and stock index futures. The Group uses derivative
instruments to reduce the impact of price volatility on its investment portfolio. However, the PRC derivatives
market currently does not provide sufficient means for the Group to hedge against volatile trading markets, which
may make it difficult for the Group to reduce its exposure to fluctuations in price volatility on its investment
portfolio, and the derivatives it uses may not be as effective as it expects. In addition, derivatives contracts the
Group enters into expose it to the risks associated with these instruments and its underlying assets, which could
result in substantial losses. The secondary market for derivatives is volatile and the Group may be inexperienced
in managing new products or trading derivative products.
18
The performance of the trading and institutional client services business of the Group is determined by its
investment decisions and judgments based on its assessment of existing and future market conditions. The Group
closely monitors the market value and financial performance of its proprietary trading portfolio, and actively
adjusts such portfolio and allocates assets based on market conditions and internal risk management guidelines.
However, the investment decisions of the Group are a matter of judgment, which involves management discretion
and assumptions. If the decision-making process of the Group fails to minimise losses effectively while capturing
gains, or its forecasts do not conform to actual changes in market conditions, its trading and institutional client
services business may not achieve the investment returns it anticipates, and it could even suffer material losses,
any of which would materially and adversely affect its business, financial condition and results of operations. In
addition, certain classes of the assets of the Group, such as its available-for-sale securities, are marked to market.
A decline in the value of the available-for-sale securities of the Group could result in the recognition of
impairment losses if management determines that such a decline in value is not temporary. This evaluation is a
matter of judgment, which includes the assessment of several factors. If the management of the Group determines
that an asset is impaired, the book value of the asset is adjusted and a corresponding loss is recognised in current
earnings. Deterioration in the market value of available-for-sale securities could result in the recognition of
impairment loss.
The financial leasing business of the Group is subject to various risks and there is no guarantee that the
financial leasing business can maintain rapid growth in the future.
The Group conducts its financial leasing business mainly through UT Capital Group. The Group’s revenue in
financial leasing business grew rapidly in the recent years. For the years ended 31 December 2020, 2021 and
2022, its segment revenue from financial leasing business was RMB8,361.7 million, RMB8,877.6 million and
RMB8,973.6 million, representing 15.4%, 15.3% and 21.4% of its total revenue, gains and other income,
respectively.
UT Capital Group’s inability to maintain its asset quality may have a material adverse impact on its financial
leasing business, financial condition and results of operations. Sustainable business growth of UT Capital Group
depends significantly on its ability to effectively manage and maintain asset quality. UT Capital Group’s asset
quality may deteriorate due to various factors, some of which are beyond control of the Group. These factors
include a slowdown in the PRC or global economic growth, the occurrence of a global credit crisis, or other
adverse market trends. In respect of financial leasing business, any significant changes in the Group’s lessees’
industries may adversely affect their operations, financial condition and cash flows, which may affect their
ability to perform their payment obligations in a timely manner and may lead to default of the lessees. Other
factors may affect the Group’s lessees’ financial condition and cash flows, such as an increase in operating costs,
labour shortage, fluctuations in interest rates and an increase in financing cost, etc.
UT Capital Group has been continually improving its business model and risk management measures and has
taken initiatives to mitigate risks to maintain and reduce the levels of its NPAs. The Group takes various
measures, including initiating lawsuits, to recover its credit assets at risk. However, the above measures may not
be as effective as UT Capital Group anticipates. If UT Capital Group is unable to maintain its asset quality, the
Group’s financial leasing business, financial condition and business operations may be materially and adversely
affected.
In addition, UT Capital Group may not be able to continue to grow if it is not able to expand its product and
service offerings to attract new customers, improve its marketing strategies, or broaden its distribution channels.
The Group’s ability to maintain business growth in the financial leasing business is highly dependent on various
factors beyond control of the Group, including the economic growth, interest rate, development of financial
leasing and financial industries, as well as changes in laws, regulations and rules applicable to the leasing
industry in China. Any unfavourable change such factors may prevent the Group from maintaining its growth
rate.
The Group plans to continue to invest substantial financial, management and operational resources to sustain its
growth. However, the Group cannot provide any assurance that it will be able to continually obtain these
resources in the future. For instance, the Group may not be able to obtain additional internal and external capital
to support its business growth on commercially acceptable terms, or to retain and attract sufficient number of
competent staff to support its business development.
19
Any significant disruption in the operations of Haitong International Securities in Hong Kong, the
operations of Haitong Bank in Portugal and the United Kingdom or the other overseas operations of the
Group could have a material adverse effect on its overseas business.
As the Group generates part of the revenue and other income in its overseas business from its operations in Hong
Kong, its overseas business depends on, to a large extent, the results of operations of Haitong International
Securities and the other subsidiaries of the Group incorporated in Hong Kong. However, there is no guarantee
that Haitong International Securities and the Group’s other Hong Kong operations may continue to experience
the same level of growth or profitability. For example, in 2022, Haitong International Securities incurred a net
loss of HK$6,541 million, which although the Group believe does not has a material adverse impact on the
Group, there is no guarantee that events like this or even worse will not occur in the future that could affect the
business, financial condition, results of operations and prospects of the Group. Moreover, a variety of external
factors that could significantly affect the Group’s operations in Hong Kong include, but are not limited to,
changes in the general economic and market conditions in Hong Kong and compliance with various regulatory
and legal requirements in Hong Kong. For example, the Hong Kong economy has experienced significant
downturns in the past, including in connection with the outbreak of SARS in 2003, the global financial crisis and
the market volatility in the second half of 2011. These economic downturns resulted in substantial losses in the
securities markets, significant deterioration in customers’ asset quality and increases in the cost of funding in the
overseas markets. In addition, the outbreak of communicable diseases such as the COVID-19 on a global scale
may also affect investment sentiment and result in sporadic volatility in global capital markets and economic
downturns.
In September 2015, the acquisition of BESI, which was then renamed to Haitong Bank by the Group, was
completed. While this acquisition enriches the Group’s cross-border network in Europe, North America, South
America, South Asia and Oceania, it also exposes the Group to risks associated with such areas.
Any significant disruption in the operations of Haitong International Securities, Haitong Bank or the other
overseas operations of the Group could have a material adverse effect on its business, financial condition, results
of operations and prospects.
There could be conflicts of interest arising out of the different roles played by the Guarantor and its
subsidiaries, and the Group’s other activities may affect the value of the Notes.
The Guarantor is the guarantor of the Notes and its subsidiaries might also be appointed as Dealers for certain
Notes. The Guarantor or its subsidiaries may also issue other competing financial products which may affect the
value of the Notes. Investors should also note that potential and actual conflicts of interest may arise from the
different roles played by the Guarantor and its subsidiaries in connection with the Notes and the economic
interests in each role may be adverse to the investors’ interests in the Notes. Although the Guarantor has internal
control policies and procedures to minimise any potential conflict of interest, the Guarantor owes no duty to the
investors to avoid any such conflicts.
The Group may be subject to liability and reputational damage for distribution of financial products issued
by third-party institutions.
The Group distributes, through our branch network and online platform, financial products issued by third-party
institutions. The structure of some financial products may be complex and involve various risks. Although as a
third-party distributor, the Group is not liable for any investment loss or default directly derived from the
financial products it distributed to its clients, the Group may be subject to client complaints, litigation, regulatory
investigation and negative news or comments, which could have an adverse effect on its reputation, clients
relationships, business and prospects. In addition, certain third-party financial products, such as trust schemes,
may have complex structures with various risks, including credit risks, interest risks and liquidity risks. The
Group’s risk management policies and procedures may fail to fully identify such risks, and its sales
representatives may fail to disclose such risks to its wealth management customers properly, resulting in potential
mismatch to customers’ risk tolerance and investment preference and unanticipated significant loss. This may
also subject the Group to client complaints and litigation risks. As a result, the Group’s reputation, customer
relationships, business and prospects will be materially and adversely affected.
20
The business of the Group is subject to concentration risks due to significant holdings of financial assets
or significant capital commitments.
Certain of the Group’s business lines are capital intensive, such as its investment banking, proprietary trading,
direct investment, margin financing and securities lending, and financial leasing businesses, which may result in
the Group having significant holdings of selected asset classes or bank and other borrowings. Such capital
commitments expose the Group to concentration risks, including market risk, in the case of its holdings of
concentrated or illiquid positions in a particular asset class as part of its proprietary trading and direct investment
activities, and credit risk, in the case of its margin financing and securities lending and financial leasing
businesses. Any decline in the value of the asset holdings of the Group may reduce its income or result in losses.
A significant decrease in the liquidity of the Group could negatively affect its business and reduce customer
confidence in it.
Maintaining adequate liquidity is crucial to the business operations of the Group as it continues to expand its
margin financing and securities lending, investment banking, proprietary trading, and other business activities
with substantial cash requirements. The Group meets its liquidity needs primarily through cash generated by
operating activities and, to a lesser extent, cash provided by external financing. A reduction in the liquidity of
the Group could reduce the confidence of its customers or counterparties in it, which may result in the loss of
business and customer accounts. In addition, according to the CSRC’s requirements, the ratio between the
Group’s net capital and the summation of all risk capital reserves cannot fall below 100%, the ratio between the
Group’s core net capital and total amount of in-balance-sheet and off-balance-sheet assets cannot fall below 8%,
the ratio between the Group’s high-quality liquidity assets and net cash outflow in next 30 days cannot fall below
100% and the ratio between the Group’s stable fund available and stable fund required cannot fall below 100%.
The regulatory capital requirements are currently under review by the regulator and are subject to further
revision. If the Group fails to meet regulatory capital requirements in the PRC, regulatory authorities may impose
penalties on it or limit the scope of its business or withdrawal the license to operate securities business, which
could, in turn, have a material adverse effect on its financial condition and results of operations.
Factors that may adversely affect the liquidity position of the Group include a significant increase in its margin
financing activities, increased regulatory capital requirements, substantial investments, other regulatory changes
or a loss of market or customer confidence. When cash generated from the operating activities of the Group is
not sufficient to meet its liquidity or regulatory capital needs, it must seek external financing. During periods of
disruptions in the credit and capital markets, potential sources of external financing could be limited and the
borrowing costs of the Group could increase. Although the management of the Group believes that it maintains
sufficient credit lines and banking facilities, external financing may not be available on acceptable terms or at
all due to unfavourable market conditions and disruptions in the credit and capital markets.
The Group has had, and may continue to have, negative cash flows from operating activities.
For the years ended 31 December 2020, 2021 and 2022, the Group’s net cash used in operating activities was
RMB6,251.3 million, net cash from operating activities was RMB52,747.4 million and net cash from operating
activities was RMB17,793.0 million, respectively. The Group cannot provide any assurance that it will not
continue to record negative cash flow from its operating activities in the future, which may limit its working
capital and in turn, the Group’s business, financial condition, results of operations and prospects may be
materially and adversely affected.
The Group is subject to extensive PRC regulatory requirements, the non-compliance with which could
cause it to incur penalties.
As a participant in the securities and financial services industries, the Group is subject to extensive PRC
regulatory requirements, which are designed to ensure the integrity of the financial markets, the soundness of
securities firms and other financial institutions and the protection of investors. These regulations often serve to
limit the activities of the Group by, among other things, imposing capital requirements, limiting the types of
products and services it may offer, restricting the types of securities in which it may invest and limiting the
number and location of branches it may establish. The PRC regulatory authorities conduct periodic or ad hoc
inspections, examinations and inquiries in respect of the Group’s compliance with such requirements. Failure to
comply with the applicable regulatory requirements could result in sanctions, fines, penalties or other
21
disciplinary actions, including, among other things, a downgrade of its regulatory rating and limitations or
prohibitions on the future business activities of the Group, which may limit its ability to conduct pilot
programmes and launch new businesses and harm its reputation, and consequently materially and adversely affect
its financial condition and results of operations. For instance, the Guarantor was penalised by the Chongqing
Securities Regulatory Bureau of CSRC on 14 October 2021, for failing to perform its duties of care and due
diligence in its supervision of the financial advisory business of Southwest Pharmaceutical Co., Ltd. (currently
known as Aurora Optoelectronics Co., Ltd.) in 2017. The Group has implemented remedial measures in response
to the foregoing non-compliance and has not received any objection or follow-up actions from the relevant
regulatory authorities.
Moreover, relevant rules and regulations could be revised from time to time based on the development of the
securities markets. Despite the efforts of the Group to comply with applicable regulations, there are a number
of associated risks, particularly in areas where applicable regulations may be unclear or where regulators
subsequently revise their previous guidance. Such changes in the guidance, interpretation or enforcement of
existing rules and regulations, may directly impact the Group’s business strategies and prospects.
The Group’s international businesses are highly regulated in Hong Kong.
The Group’s international business are subject to various applicable laws, regulations and codes of relevant
regulatory authorities, in particular, the relevant regulatory authorities in Hong Kong. From time to time, the
Hong Kong regulatory regime for the financial services industry (for example, the Securities and Futures
Ordinance (Cap. 571) of Hong Kong and the Money Lenders Ordinance (Cap. 163) of Hong Kong) has
implemented changes in such rules and regulations, some of which have resulted in additional costs to or
restrictions on the Group’s international business activities. If the Group fails to comply with the applicable rules
and regulations, it may become subject to enquiries and/or investigations by the relevant regulatory bodies and
if the results of any investigations or enquiries are severe or proved to involve serious misconduct, the Group
may be subject to penalties including fines and/or restrictions on its international business activities. In extreme
cases, it may be hampered or prevented from conducting its international business in a normal manner and some
or all of its operation licences may become suspended or revoked. Where penalties are substantial or protracted
litigation is involved, there may also be an adverse impact on the Group’s reputation, and in some cases, there
may be material and adverse impact on its business, financial condition, results of operations and prospects.
New legislation or changes in the PRC regulatory requirements may affect the business operations and
prospects of the Group.
The PRC securities industry is a highly regulated industry and relevant rules and regulations could be changed
from time to time based on the development of the securities markets. New rules and regulations and changes
in the interpretation or enforcement of currently existing rules and regulations may directly impact the business
strategies and prospects of the Group. In addition, changes in the rules and regulations could result in limitations
on the business lines the Group may conduct, modifications to its business practices or additional costs.
In particular, the Group has been selected by PRC regulators as one of the first securities firms to develop various
new businesses in the PRC securities industry. However, as the PRC securities industry is still evolving, most
of the newly-introduced businesses require further development and improvement and there are some
uncertainties regarding the enforcement of existing rules and regulations in relation to the new businesses.
Changes in the interpretation or enforcement of rules and regulations for the new businesses may result in
changes in, or the suspension of, certain of the new businesses of the Group, which could have a material adverse
effect on its business and prospects.
In the recent years, there are certain regulatory changes currently being contemplated in respect of the PRC
securities industry. For example, the CSRC published the Rules on Administration of Equity Interests in
Securities Firms ( ) on 5 July 2019, which imposes additional obligations on securities
firms regarding the management of shareholders as well as changes in and transfer of their share capital. In
another instance, on 13 June 2019, the STAR Market, a Nasdaq-style Sci-Tech Innovation Board was opened and
the pilot programme of registration-based listing was introduced, allowing start-ups to go public and get listed
without requiring substantive review and approval from government regulators. On 28 December 2019, the
National People’s Congress Standing Committee approved the amendments to the Securities Law of PRC (the
“New Securities Law”), streamlining the process for new listings on the stock markets in the PRC and marking
22
a milestone in line with the fast-changing PRC capital markets. A key provision under the New Securities Law
is to provide for the implementation of registration-based IPO system, and to allow stock exchanges instead of
the CSRC to review and approve listing applications, which is expected to simplify and shorten the IPO approval
process in the PRC. The New Securities Law came into force on 1 March 2020. The Central Economic Work
Conference proposed the full implementation of the registration system for stock issuance at the end of 2021,
which proposed the reform of the capital market. Although the Guarantor does not believe such changes would
have a material impact on the Group, there can be no assurance that enforcement of the regulatory changes would
not materially and adversely affect the Group’s business and financial condition. In addition, changes in the rules
and regulations could result in restrictions on the business lines of the Group, revisions to its business practices
and incur additional costs, which may adversely affect the Group’s ability to compete effectively with other
institutions that are not affected in the same way.
The risk management policies and procedures and internal controls, as well as the risk management tools
of the Group available to it, may not fully protect it against various risks inherent in its business.
Currently, the Group follows its internal risk management framework and procedures to manage its risk
exposures, primarily including market risk, credit risk, liquidity risk and operational risk. The risk management
policies, procedures and internal controls of the Group may not be adequate or effective in mitigating its risk
exposures or protecting it against unidentified or unanticipated risks. In particular, some methods of managing
risks are based upon observed historical market behaviour and its experience in the securities industry. These
methods may fail to predict future risk exposures, which could be significantly greater than those indicated by
the historical measures of the Group. Other risk management methods depend upon an evaluation of available
information regarding operating and market conditions and other matters, which may not be accurate, complete,
up-to-date or properly evaluated. In addition, in markets that are rapidly developing, the information and
experience data that the Group relies on for its risk management methods may become quickly outdated as
markets and regulations continue to evolve.
Management of operational, legal and regulatory risks requires, among other things, policies and procedures to
record properly and verify a large number of transactions and business activities, as well as the appropriate and
consistent application of internal control systems. These policies, procedures and internal controls may not be
adequate or effective and the business, financial condition and results of operations of the Group could be
materially and adversely affected by the corresponding increase in its risk exposures and actual losses as a result
of failures of the risk management policies, procedures and internal controls of the Group. The risk mitigation
strategies and techniques that the Group adopts may not be fully effective and may leave it exposed to
unidentified and unanticipated risks.
Furthermore, the risk management procedures and asset allocation decisions of the Group govern its proprietary
trading and investment portfolio. The Group may not have adequate risk management tools, policies and
procedures, and may not have sufficient access to resources and trading counterparties to implement effectively
its trading and investment risk mitigation strategies and techniques related to its proprietary trading and
investment portfolio. If the decision-making process of the Group fails to minimise losses effectively while
capturing gains, it may experience significant financial losses that could materially and adversely affect its
business, financial condition and results of operations.
The Group may suffer significant losses from its credit exposures.
The businesses of the Group are subject to risks that a customer or counterparty may fail to perform its
contractual obligations or that the value of collateral held to secure the obligations might be inadequate. While
the Group has internal policies and procedures designed to manage such risks, these policies and procedures may
not be fully effective. Please see “Risk Factors – Risks Relating to the Group’s Business and the PRC Securities
– The risk management policies and procedures and internal controls, as well as the risk management tools of
the Group available to it, may not fully protect it against various risks inherent in its business.” The credit
exposure of the Group mainly results from its margin financing and securities lending and financial leasing
businesses and its role as a counterparty in financial and derivative and lease contracts. Any material
non-payment or non-performance by a customer or counterparty could adversely affect the financial condition,
results of operations and cash flows of the Group.
23
In addition, the Group has exposure to credit risk associated with its available-for-sale investments and
held-to-maturity financial assets. These investments may also be subject to price fluctuations as a result of
changes in the financial market’s assessment of the issuer’s creditworthiness, delinquency and default rates and
other factors, which could adversely affect the financial condition and results of operations of the Group.
The Group faces additional risks as it expands its product and service offerings.
The Group is committed to providing new products and services in order to strengthen its leading market position
in the PRC securities industry. The Group has expanded its business to include certain developing new business.
These new businesses expose it to additional risks. For example, although the Group has established a margin
call risk control mechanism through which it monitors the value of its customers’ collateral on a real-time basis,
it may be subject to substantial risks if borrowers of margin loans default on payments or if the value of the
collateral for the loans is insufficient to cover the margin loans due to significant market volatility. The Group
may also suffer losses on stock index futures contracts it enters into if stock indices move unfavourably.
The Group will continue to expand its product and service offerings as permitted by the PRC regulatory
authorities, transact with new customers not in its traditional customer base and enters into new markets. These
activities expose the Group to new and increasingly challenging risks, including, but not limited to:
it may have insufficient experience or expertise in offering new products and services and dealing with new
counterparties and customers;
it may be subject to greater regulatory scrutiny, increased credit risks, market risks and operational risks;
it may suffer from reputational concerns arising from dealing with less sophisticated counterparties and
customers;
it may be unable to provide customers with adequate levels of service for its new products and services;
it may be unable to hire additional qualified personnel to support the offering of a broader range of products
and services;
its new products and services may not be accepted by its customers or meet its profitability expectations;
it may be unable to obtain sufficient financing from internal and external sources to support its business
expansion; and
it may not be successful in enhancing its risk management capabilities and IT systems to identify and
mitigate all the risks associated with these new products and services, new customers and new markets.
If the Group is unable to achieve the intended commercial results with respect to its offering of new products
and services, its business, financial condition, results of operations and prospects could be materially and
adversely affected.
Significant interest rate fluctuations could affect the financial condition and results of operations of the
Group.
The exposure of the Group to interest rate risk is primarily associated with its interest income, interest expenses
and fixed income securities.
The Group earns interest income from bank deposits (including its own deposits and customer deposits), margin
financing and securities lending business, financial assets held under resale agreements and financial leasing
business. Interest income from these sources is directly linked to the prevailing market interest rates. During
periods of declining interest rates, the interest income of the Group would generally decrease.
The Group makes interest payments on deposits it holds on behalf of its customers, its short-term borrowings,
other financing obligations and repurchases transactions. These interest expenses are directly linked to the
prevailing market interest rates. During periods of rising interest rates, the interest expenses and financing costs
of the Group would generally increase.
24
In addition, the Group holds fixed income securities. During periods of rising interest rates, market prices and
its investment returns on fixed income securities will generally decrease. Significant interest rate fluctuations
could reduce the Group’s interest income or returns on fixed income investments, or increase its interest
expenses, any of which could adversely affect its financial condition and results of operations.
The operations of the Group depend on key management and professional staff and its business may suffer
if it is unable to retain or replace them.
The success of the business of the Group is dependent to a large extent on its ability to attract and retain key
personnel who possess in-depth knowledge and understanding of the securities and financial markets. These key
personnel include members of its senior management, licensed sponsor representatives, experienced investment
managers and industry analysts, IT specialists, sales staff and other personnel. Therefore, the Group devotes
considerable resources to recruiting and retaining these personnel. However, the market for quality professionals
is highly competitive and the Group faces increasing competition in recruiting and retaining these individuals as
other securities firms and financial institutions are competing for the same pool of talent. Intense competition
may require it to offer higher compensation and other benefits in order to attract and retain qualified
professionals, which could materially and adversely affect its financial condition and results of operations. As
a result, the Group may be unable to attract or retain these personnel to achieve its business objectives and the
failure to do so could severely disrupt its business and prospects.
Some of the key employees of the Group are subject to non-competition arrangements. However, there is no
guarantee that such arrangements can be fully and legally enforced. If any of the Group’s senior management or
other key personnel joins or establishes a competing business, it may lose some of its customers, which may have
a material adverse effect on its business.
Future acquisitions and overseas expansions may not be successful.
In addition to organic growth, the current strategy of the Group also involves growth through acquisitions of
complementary businesses and entry into strategic alliances. This strategy entails potential risks that could have
a material adverse effect on the business of the Group, financial condition, results of operations and prospects,
including:
unidentified or unanticipated liabilities or risks in the assets or businesses which it may acquire;
inability to integrate successfully the products, services and personnel of the businesses which it may acquire
into its operations or to realise any expected cost savings or other synergies from the acquisitions;
the need to incur additional indebtedness, which may reduce its cash available for operations and other uses
due to increased debt repayment obligations;
inability to retain employees and customer relationships;
customer overlap or loss of customers; and
diversion of management attention and other resources.
The Group may not be able to identify attractive acquisition opportunities or make acquisitions on attractive
terms or obtain financing necessary to complete and support such acquisitions. In addition, the anticipated future
expansion of the operations of the Group through acquisitions will place a significant strain on its management,
internal controls and IT systems and resources, and could also result in additional expenditure. In addition to
training, managing and integrating its workforce, the Group will need to continue to develop and improve its
management and financial controls. There is no guarantee that any of such acquisitions will result in long-term
benefits to it or that the Group will be able to manage effectively the integration and growth of its operations.
Failure to do so may materially and adversely affect its business, financial condition, results of operations and
prospects.
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In addition, the overseas acquisitions of the Group (including acquisitions in Hong Kong) may expose it to
additional risks, including, among others:
difficulties with managing overseas (including Hong Kong) operations, including complying with the various
regulatory and legal requirements of different jurisdictions;
different approval or licence requirements;
challenges in providing products, services and support in these overseas (including Hong Kong) markets;
challenges in managing its sales channels and overseas (including Hong Kong) distribution network
effectively;
differences in accounting treatment in different jurisdictions;
potential adverse tax consequences;
foreign exchange losses;
limited protection for intellectual property rights;
inability to enforce contractual or legal rights effectively;
changes in local government laws, regulations and policies; and
local political and economic instability or civil unrest.
In addition, the Group may not be able to realise any anticipated benefits or achieve the synergies it expects from
acquisitions, the clients of the Group may react unfavourably to its acquisitions and joint venture strategy, and
it may be exposed to loss of key personnel or management or additional liabilities of any acquired business or
joint venture. If the Group is unable to avoid or mitigate these risks effectively, its ability to expand its business
overseas (including Hong Kong) will be impaired, which could have a material adverse effect on its business,
financial condition, results of operations and prospects.
The Guarantor published and may continue to publish periodical financial information pursuant to
applicable PRC regulatory rules. Investors should be cautious and not place any reliance on the financial
information other than that disclosed in this Offering Circular.
The Guarantor’s equity securities are listed on the Main Board of the Hong Kong Stock Exchange and the
Shanghai Stock Exchange. According to applicable securities regulations, the Guarantor publishes its quarterly
financial information to satisfy its continuing disclosure obligations relating to its listed securities. The quarterly
financial information published by the Guarantor is normally derived from the Group’s management accounts
which have not been audited or reviewed by independent auditors and may not be prepared in accordance with
IFRS. As such, the quarterly financial information published should not be referred to or relied upon by potential
purchasers to provide the same quality of information associated with any audited or reviewed information. The
Guarantor is not responsible to holders of the Notes for the quarterly financial information from time to time
published and therefore investors should not place any reliance on any such quarterly financial information.
The Group may not be able to detect and prevent fraud or other misconduct committed by its employees,
representatives, agents, customers or other third parties.
The Group may be exposed to fraud or other misconduct committed by its employees, representatives, agents,
customers or other third parties that could not only subject it to financial losses and sanctions imposed by
governmental authorities but also adversely affect its reputation.
26
The internal control procedures of the Group are designed to monitor its operations and ensure overall
compliance. However, the internal control procedures of the Group may be unable to identify all incidents of
non-compliance or suspicious transactions in a timely manner or at all. Furthermore, it is not always possible to
detect and prevent fraud and other misconduct, and the precautions the Group takes to prevent and detect such
activities may not be effective. There is no guarantee that fraud or other misconduct will not occur in the future.
If such fraud or other misconduct does occur, it may cause negative publicity as a result. The Group’s failure to
detect and prevent fraud and other misconduct may have a material adverse effect on its business reputation,
financial condition and results of operations.
In addition, as there are other financial institutions which carry similar trademarks or corporate names as the
Group’s, any negative publicity involving such institutions may adversely reflect on its reputation and business
if the market or its clients are unable to distinguish its trademarks or names from other financial institutions.
The Group may not fully be able to detect money laundering and other illegal or improper activities in
its business operations on a timely basis.
The Group is required to comply with applicable anti-money laundering, anti-terrorism laws and other
regulations in the PRC and overseas (including Hong Kong). The PRC Anti-money Laundering Law (
) requires financial institutions to establish sound internal control policies and procedures with
respect to anti-money laundering monitoring and reporting activities. Such policies and procedures require the
Group to, among other things, establish or designate an independent anti-money laundering department, establish
a customer identification system in accordance with relevant rules, record the details of customer activities and
report suspicious transactions to relevant authorities.
While the Group has adopted policies and procedures aimed at detecting and preventing the use of its business
platforms to facilitate money laundering activities and terrorist acts, such policies and procedures in some cases
have only been recently adopted and may not completely eliminate instances in which it may be used by other
parties to engage in money laundering and other illegal or improper activities. In the event that the Group fails
to comply fully with applicable laws and regulations, the relevant government agencies may freeze its assets or
impose fines or other penalties on it. There is no guarantee that there will not be failures in detecting money
laundering or other illegal or improper activities which may adversely affect its business reputation, financial
condition and results of operations.
The Group relies heavily on IT systems to process and record its transactions and offer online products
and services.
The operations of the Group relies heavily on the ability of its IT systems to process accurately a large number
of transactions across numerous and diverse markets and its broad range of products in a timely manner. The
system of the Group for processing securities transactions is highly automated. A prolonged disruption to, or
failure of, its information processing or communications systems would limit its ability to process transactions.
This would impair the Group’s ability to service its customers and execute trades on behalf of customers and for
its own account, which could materially and adversely affect its competitiveness, financial condition and results
of operations.
The proper functioning of the Group’s financial control, risk management, accounting, customer service and
other data processing systems, together with the communication networks between its headquarters and branches,
are critical to its business and its ability to compete effectively. The Group has established back-up centres in
Shanghai and Shenzhen to carry on principal functions in the event of a catastrophe or failure of its systems,
including those caused by human error. However, there is no guarantee that its operations will not be materially
disrupted if any of its systems fail.
In addition, the securities industry is characterised by rapidly changing technology. The Group has also adhered
to the development strategy of “leading by technology” and promoted the construction of “Digital Haitong 2.0”
in business development, operation management, data application, technological capabilities, and mechanisms.
For instance, the Group developed a service platform for institutional clients “E-Haitong Da (e )” and an
integrated intelligent trading platform “ShareEBook (e )” and launched a securities source management
system “e-Haitong Securities (e )” in recent years. Therefore, online securities trading platforms and other
new channels, such as mobile devices, are becoming increasingly popular among its customers due to their
27
convenience and user-friendliness. The Group relies heavily on technology, particularly the Internet, to provide
high quality online services. However, the technology operations of the Group are vulnerable to disruptions from
human error, natural disasters, power failure, computer viruses, spam attacks, unauthorised access and other
similar events. Disruptions to, or instability of, technology of the Group or external technology that allows its
customers to use its online products and services could harm its business and its reputation.
The Group’s business might be affected by the operational failure of its employees.
The Group faces the risk of the operational failure of its employees, which mainly includes accidents or errors
that take place in the course of the day-to-day operation of wealth management business, investment banking
business, asset management business and international business. Although the Group has implemented internal
control measures, including strengthened transaction review and enhanced standard operation training to prevent
against the risk of employee operational failure, the Group may not be able to completely avoid the occurrence
of, or timely detect, any operational failure. Any future operational failure of employees or any termination of
employment relationships in relation to operational failure could adversely affect the Group’s business and
reputation, as well as the Group’s ability to execute transactions, service the Group’s clients and manage the
Group’s exposure to various risks.
The Group’s business is susceptible to the operational failure of third parties.
The Group faces the risk of operational failure or termination of any of the exchanges, depositaries, clearing
agents or other financial intermediaries it uses to facilitate its securities transactions. Any future operational
failure or termination of the particular financial intermediaries that the Group uses could adversely affect its
ability to execute transactions, serve its customers and manage its exposure to various risks.
In addition, as the Group’s interconnectivity with its customers grows, its business also relies heavily on its
customers’ use of their own systems, such as personal computers, mobile devices and the Internet, and the Group
will increasingly face the risk of operational failure in connection with its customers’ systems.
The Group may be subject to litigation and regulatory investigations and proceedings and may not always
be successful in defending itself against such claims or proceedings.
The securities industry faces substantial litigation and regulatory risks, including the risk of lawsuits and other
legal actions relating to information disclosure, sales or underwriting practices, product design, fraud and
misconduct, as well as protection of personal and confidential information of the customers of the Group. The
Group may be subject to arbitration claims and lawsuits in the ordinary course of its business. The Group may
also be subject to inquiries, investigations, and proceedings by regulatory and other governmental agencies.
Actions brought against the Group may result in settlements, injunctions, fines, penalties or other results adverse
to it that could harm its reputation. Even if the Group were successful in defending itself against these actions,
the costs of such defence may be significant to it. In market downturns, the number of legal claims and amount
of damages sought in litigation and regulatory proceedings may increase. A significant judgment or regulatory
action against the Group, or a disruption in its business arising from adverse adjudications in proceedings against
its directors, officers or employees, would have a material adverse effect on its liquidity, business, financial
condition, results of operations and prospects. Please see “Risk Factors – Risks Relating to the Group’s Business
and the PRC Securities – The Group is subject to extensive PRC regulatory requirements, the non-compliance
with which could cause it to incur penalties.”
Failure to identify and address conflicts of interest appropriately could adversely affect the business of the
Group.
As the Group expands the scope of its business and its client base, it is critical for it to be able to address potential
conflicts of interest, including situations where two or more interests within its business legitimately exist but
are in competition or conflict. Please see “Description of the Group – Internal Control and Risk Management –
Conflicts of Interest.”
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The Group has extensive internal control and risk management procedures that are designed to identify and
address conflicts of interest. However, appropriately identifying and dealing with potential conflicts of interest
is complex and difficult. The Group’s failure to manage conflicts of interest could harm its reputation and erode
client confidence in it. In addition, potential or perceived conflicts of interest may also give rise to litigation or
regulatory actions. Any of the foregoing could adversely affect the business, financial condition and results of
operations of the Group.
The Group’s insurance coverage may not be adequate, which could expose it to costs and business
disruption.
The Group maintains certain insurance to cover risks in business operations. See “Description of the Group –
Insurance” for details. However, insurance companies in China generally do not offer as extensive an array of
insurance products as insurance companies do in countries with more developed economics. Consequently, the
Group does not maintain sufficient business interruption insurance or key man life insurance, which are not
mandatory under PRC laws. The Group believes it has obtained all necessary insurance required under PRC laws.
The Group may be subject to liability and regulatory action if it is unable to protect personal and other
confidential information of its customers.
Various laws, regulations and rules require the Group to protect the personal data and confidential information
of its customers. The Group’s databases contain personal data of its customers, such as name and account
number, location information relating to the address and telephone numbers for the customer and account-
specific information such as the date of transactions and balance. These databases are vulnerable to damage,
including telecommunications and network failures, natural disasters and human acts both by individuals external
to the Group’s business, as well as its employees, including fraud, identity theft and other misuse of personal
data. The Group routinely transmits and receives personal data and confidential information of its customers
through the Internet, by email and other electronic means. Despite the security measures that the Group has
implemented, the systems may be subject to physical or electronic break-ins, cyber-attacks, computer viruses and
similar disruptive problems, and third parties may have the technology or expertise to breach the security of the
Group’s transaction data and the Group may not be able to ensure that its vendors, service providers,
counterparties or other third parties, have appropriate measures in place to protect the confidentiality of such
information. In addition, there can be no assurance that the Group’s employees who have access to the personal
data and confidential information of its customers will not improperly use such data or information. Any security
or privacy breach of these databases could expose the Group to liability, including regulatory fines or penalties,
increase its expenses relating to the resolution of these breaches and the mitigation of their impact on affected
individuals, harm the Group’s reputation and deter customers from turning to it for their investment needs, which
could have a material adverse effect on the Group’s business, financial condition, financial returns and results
of operations.
Any future occurrence of major natural disasters or outbreaks of serious health epidemics and contagious
diseases, wars or terrorist activities may have a material and adverse effect on the business, financial
condition and results of operations of the Group.
Any future occurrence of major natural disasters or outbreaks of serious health epidemics and contagious
diseases, wars or terrorist activities may severely disrupt our business, and materially and adversely affect the
Group’s financial condition and results of operations. An outbreak of a health epidemic or contagious disease,
such as Severe Acute Respiratory Syndrome (SARS) and the novel coronavirus (COVID-19) in the regions, could
cause a widespread health crisis and harm business activities in affected areas, which could in turn severely
disrupt the Group’s operations. The future occurrence of natural disasters or outbreaks of health epidemics and
contagious diseases, or measures taken by the PRC government or other countries in response to such outbreaks
of health epidemics and contagious diseases, wars or terrorist activities may also seriously interrupt the Group’s
operations or those of the Group’s clients and counterparties, which could have a material and adverse effect on
the Group’s financial condition and results of operations.
In particular, since the end of December 2019, the outbreak of COVID-19, had materially and adversely affected
the global and China’s economy. In 2022, in response to new rounds of outbreak of COVID-19, some cities and
regions in the PRC, such as Shenzhen, Shanghai, Beijing, Central China and Northeast China implemented
heightened epidemic prevention, control and blockade measures. On 26 December 2022, National Health
Commission of the PRC announced that from 8 January 2023, the PRC would downgrade management of
29
COVID-19 from Class A to Class B in accordance with PRC law on prevention and treatment of infectious
disease, and remove COVID-19 from quarantinable infectious disease management carried out in accordance
with the Frontier Health and Quarantine Law of the PRC. However, there remain uncertainties associated with
the COVID-19, which may have potential continuing impacts in the future if the pandemic and the resulting
disruption were to extend over a prolonged period. Any recurrence of the COVID-19 outbreak in China, or
continuance of outbreaks in other parts of the world, could have material and adverse effect on the Group’s
business, financial condition and results of operations.
RISKS RELATING TO THE PRC
China has experienced a slowdown in its economic development and the future performance of China’s
economy is uncertain.
The economy of the PRC experienced rapid growth in the past 40 years. There has been a slowdown in the growth
of the PRC’s GDP since the second half of 2013 and this has raised market concerns that the historic rapid growth
of the economy of the PRC may not be sustainable. According to the National Statistics Bureau of the PRC, the
annual growth rate of China’s GDP in 2019 decreased slightly to 6.0 per cent. on a year-on-year basis compared
to 6.7 per cent. in 2018, and it further decreased to 2.2 per cent. in 2020 on a year-on-year basis. Although the
PRC recorded a GDP annual growth rate of 8.4 per cent. in 2021, it then fell to 3.0 per cent in 2022 on a
year-on-year basis. There can be no assurance that the level of economic growth rate will continue to grow at
the same rate as in the past, or at all. Any future slowdown may create a credit tightening environment, increase
the Group’s financing costs, negatively affect the government’s fiscal income and investment in fixed assets or
reduce governmental subsidies to the Group.
The future performance of China’s economy is not only affected by the economic and monetary policies of the
PRC Government, but it is also exposed to material changes in global economic and political environments as
well as the performance of certain major developed economies in the world, such as the United States and the
European Union. For example, the China-U.S. tensions and the ongoing conflict between Russia and Ukraine
have brought uncertainty to the economic conditions of the world, including but not limited to further decreases
in global stock exchange indices, increased foreign exchange volatility (in particular a further weakening of the
pound sterling and euro against other leading currencies) and a possible economic recession involving more
countries and areas. Therefore, there exists continued uncertainty for the overall prospects for the global and the
PRC economies.
Changes in the economic, political and social conditions in the PRC and government policies adopted by
the PRC Government could affect the Group’s business and prospects.
The economy of the PRC differs from the economies of most developed countries in many respects, including,
with respect to government involvement, level of development, economic growth rate, control of foreign
exchange and allocation of resources. The economy of the PRC has been transitioning from a planned economy
to a more market-oriented economy. In recent years, the PRC Government has implemented a series of measures
emphasising market forces for economic reform, the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises.
However, a large portion of productive assets in the PRC remain owned by the PRC Government. The PRC
Government continues to play a significant role in regulating industrial development, the allocation of resources,
production, pricing and management, and there can be no assurance that the PRC Government will continue to
pursue the economic reforms or that any such reforms will not have an adverse effect on the Group’s business.
The Group’s operations and financial results could also be affected by changes in political, economic and social
conditions or the relevant policies of the PRC Government, such as changes in laws and regulations (or the
interpretation thereof). In addition, the growth of development in the economic and technology development
zones and infrastructure construction demand in the PRC depends heavily on economic growth. If the PRC’s
economic growth slows down or if the economy of the PRC experiences a recession, the growth of development
in Chinese economic and technology development zones and infrastructure construction demand may also slow
down, and the Group’s business prospects may be materially and adversely affected. The Group’s operations and
financial results, as well as its ability to satisfy its obligations under the Notes, could also be materially and
adversely affected by changes to or introduction of measures to control changes in the rate or method of taxation
and the imposition of additional restrictions on currency conversion.
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Uncertainty with respect to the PRC legal system could affect the Group.
The Group’s major business is conducted in the PRC and the majority of its operations are located in the PRC,
hence its business operations are regulated primarily by PRC laws and regulations. The PRC legal system is a
civil law system based on written statutes. Unlike the common law system, past court judgments in the PRC have
limited precedential value and may be cited only for reference. Furthermore, PRC written statutes often require
detailed interpretations by courts and enforcement bodies for their application and enforcement. Since 1979, the
PRC Government has been committed to developing and refining its legal system and has achieved significant
progress in the development of its laws and regulations governing business and commercial matters, such as in
foreign investment, company organisation and management, commercial transactions, tax and trade. However,
China has not developed a fully integrated legal system and the recently enacted laws and regulations may not
sufficiently cover all aspects of economic activities in the PRC. In particular, as these laws and regulations are
still evolving, in view of how the PRC’s financial industry is still developing, and because of the limited number
and non-binding nature of published cases, there exist uncertainties about their interpretation and enforcement,
and such uncertainties may have a negative impact on the Group’s business.
In addition, the PRC legal system is based, in part, on government policies and internal rules (some of which are
not published on a timely basis or at all) that may have a retroactive effect. As a result, the Group may not be
aware of the Group’s violation of these policies and rules until sometime after the violation. In addition, any
litigation in China may be protracted and result in substantial costs and diversion of resources and management’s
attention.
Furthermore, the administration of PRC laws and regulations may be subject to a certain degree of discretion by
the executive authorities. This has resulted in the outcome of dispute resolutions not being as consistent or
predictable compared to other more developed jurisdictions. In addition, it may be difficult to obtain a swift and
equitable enforcement of laws in the PRC, or the enforcement of judgments by a court of another jurisdiction.
These uncertainties relating to the interpretation and implementation of PRC laws and regulations may adversely
affect the legal protections and remedies that are available to the Group in its operations and to Noteholders.
For example, the NDRC issued the Notice on Promoting the Reform of the Filing and Registration System for
Issuance of Foreign Debt by Corporates (Fa Gai Wai Zi [2015] No. 2044) (
( [2015]2044 )) (the “NDRC Circular”) on 14 September 2015, which
came into effect on the same day. According to the NDRC Circular, domestic enterprises and their overseas
controlled entities shall procure the registration of any debt securities issued outside the PRC with a maturity not
less than one year with the NDRC prior to the issue of the securities and notify the particulars of the relevant
issues within 10 working days after the completion of the issue of the securities. On 5 January 2023, the NDRC
issued the Administrative Measures for the Review and Registration of Medium- and Long-Term Foreign Debt
of Enterprises ( ( 56 )) (“NDRC Administrative
Measures”), which came into effect on 10 February 2023. On 9 February 2023, the NDRC published the
frequently asked questions on the NDRC Administrative Measures and its responses (the “FAQs”), which
provided further clarifications on the practical implications of certain provisions in the NDRC Administrative
Measures. In accordance with the FAQs, the Guarantor’s NDRC pre-issuance registration certification dated 3
February 2023 remains in full force and effect as of the date of this Offering Circular, and that the Issuer shall
comply with the provisions relating to foreign debt risk management and interim and ex-post supervision under
the NDRC Administrative Measures. The NDRC Administrative Measures is a relatively new regulation, and
uncertainties remain regarding its interpretation, implementation and enforcement by the NDRC and, in
particular, there is a risk that the NDRC could in the future amend the rules relating to the NDRC Administrative
Measures or the interpretation thereof (including with retroactive effect), such that debt instruments similar to
the Notes will be subject to the registration and other requirements under the NDRC Administrative Measures.
As a result of these uncertainties with respect to the PRC legal system, lack of uniform interpretation and
effective enforcement, the Group may be subject to uncertainties in its operations. These uncertainties can also
affect the legal remedies and protections available to investors, and can adversely affect the value of their
investment.
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Investors may experience difficulties in effecting service of legal process and enforcing judgments against
the Group and the Group’s management.
The majority of the Group’s assets and the subsidiaries of the Group are located in the PRC. In addition, most
of the Issuer and the Guarantor’s directors, supervisors and executive officers reside within the PRC and the
assets of the Group’s directors and officers may be located within the PRC. As a result, it may not be possible
to effect service of process outside the PRC upon most of the Group’s directors, supervisors and senior
management, including for matters arising under applicable securities law. A judgment of a court of another
jurisdiction may be reciprocally recognised or enforced if the jurisdiction has a treaty with the PRC or if
judgments of the PRC courts have been recognised before in that jurisdiction, subject to the satisfaction of other
requirements. However, the PRC does not have treaties providing for the reciprocal recognition and enforcement
of judgments of courts with many countries, including Japan, the United States and the United Kingdom.
Therefore, it may be difficult for investors to enforce any judgments obtained from foreign courts against the
Group, the Issuer and the Guarantor, any of their respective directors, supervisors or senior management in the
PRC.
PRC economic, political and social conditions, as well as government policies, could affect the Group’s
business and prospects.
Substantially all of the Group’s assets are located in the PRC and most of the Group’s revenue is sourced from
the PRC. Accordingly, the Group’s business, financial condition, results of operations and prospects are subject,
to a significant degree, to economic, political and legal developments in the PRC. For more than four decades,
the PRC Government has implemented economic reform measures to utilise market forces in the development
of the PRC economy. In addition, the PRC Government continues to play a significant role in regulating
industries and the economy through policy measures. The Group cannot predict whether changes in PRC
economic, political or social conditions and in PRC laws, regulations and policies will adversely affect its
business, financial condition, results of operations or prospects. In addition, many of the economic reforms
carried out by the PRC Government are unprecedented or experimental and are expected to be refined and
improved over time. Other political, economic and social factors may also lead to further adjustments of the
reform measures. This refining and adjustment process may not necessarily have a positive effect on the Group’s
operations and business development.
The Group’s business, financial condition and results of operations may be adversely affected by:
changes in PRC political, economic and social conditions;
changes in policies of the PRC Government, including changes in policies in relation to the Group’s business
segments;
changes in laws and regulations or the interpretation of laws and regulations;
changes in the interest rates;
measures that may be introduced to control inflation or deflation;
changes in the rate or method of taxation;
the imposition of additional restrictions on currency conversion and remittances abroad; and
a reduction in tariff protection and other import restrictions.
Furthermore, the growth of the industries the Group is engaged in depends heavily on economic growth of the
PRC. The Group cannot assure that the current growth rate of the PRC will be sustained in the future. From time
to time, the PRC Government has implemented certain measures in order to prevent the PRC economy from
experiencing excessive inflation. Such governmental measures may cause a decrease in the level of economic
activity and have an adverse impact on economic growth in China. If China’s economic growth fluctuates, the
industries the Group is engaged in may also grow at a slower pace or even decline. Such events could materially
and adversely affect the Group’s business, financial condition, results of operations and prospects.
32
Government control of currency conversion may adversely affect the value of investors’ investments.
Most of the Group’s revenue is denominated in Renminbi, which is also the reporting currency of the Group.
Renminbi is not a freely convertible currency. A portion of the Group’s cash may be required to be converted into
other currencies in order to meet the Group’s foreign currency needs.
However, the PRC Government may restrict future access to foreign currencies for current account transactions
at its discretion. If the foreign exchange control system prevents the Group from obtaining sufficient foreign
currency to satisfy its currency demands, the Group’s capital expenditure plans, business operations and
consequently its results of operations and financial condition could be materially and adversely affected.
Future fluctuations in the value of the Renminbi could materially and adversely affect the Group’s
business, financial condition and results of operations.
The Group conducts its business mainly in Renminbi. However, a portion of its bank borrowings is denominated
in U.S. dollars, although the Group’s functional currency is the Renminbi. As a result, fluctuations in exchange
rates, particularly between the Renminbi and the U.S. dollar, could affect the Group’s profitability and may result
in foreign currency exchange losses of the Group’s foreign currency-denominated liabilities.
The value of the Renminbi against the U.S. dollar, the euro and other currencies fluctuates and is affected by,
among other things, changes in China’s political and economic conditions. On 21 July 2005, the PRC
Government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate
within a regulated band based on market supply and demand and by reference to a basket of currencies. Since
then, the PRC Government has made, and may in the future make, further adjustments to the exchange rate
system. PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank
foreign exchange market after the closing of the market on each working day, and makes it the central parity for
the trading against the Renminbi on the following working day. PBOC surprised markets in August 2015 by
thrice devaluing the Renminbi, lowering its daily mid-point trading price significantly against the U.S. dollar.
The currency devaluation of the Renminbi was intended to bring it more in line with the market by taking market
signals into account. Renminbi depreciated significantly against the U.S. dollar following this August 2015
announcement by the PBOC. Although starting from 1 October 2016, Renminbi has been added to the Special
Drawing Rights basket created by the International Monetary Fund, there can be no assurance that the PRC
Government will continue to gradually liberalise the control over cross-border Renminbi remittances in the
future, that any pilot schemes for Renminbi cross-border utilisation will not be discontinued or that new PRC
regulations will not be promulgated in the future which have the effect of restricting the remittance of Renminbi
into or outside the PRC.
Following the gradual appreciation against the U.S. dollar in 2017, Renminbi experienced a recent depreciation
in value against U.S. dollars followed by a fluctuation in 2018 and early 2019. There can be no assurance that
the Renminbi will not experience significant depreciation or appreciation against the U.S. dollar or against any
other currency in the future. Furthermore, the Group is required to obtain SAFE’s approval before converting
significant amounts of foreign currencies into Renminbi. As a result, any significant increase in the value of
Renminbi against foreign currencies could reduce the value of the Group’s foreign currency-denominated
revenue and assets and could materially and adversely affect the Group’s businesses, financial conditions, results
of operations and prospects. In addition, there are limited instruments available for the Group to reduce its
foreign currency risk exposure at reasonable costs. All of these factors could materially and adversely affect the
Group’s businesses, financial conditions and results of operations.
The payment of dividends by the Guarantor’s operating subsidiaries in the PRC is subject to restrictions
under the PRC law.
The PRC laws require that dividends be paid only out of net profit, calculated according to the PRC accounting
principles, which differ from generally accepted accounting principles in other jurisdictions. In addition, the PRC
law requires enterprises set aside part of their net profit as statutory reserves before distributing the net profit
for the current financial year. These statutory reserves are not available for distribution as cash dividends. Since
the availability of funds to fund the Guarantor’s operations and to service its indebtedness depends upon
dividends received from these subsidiaries, any legal restrictions on the availability and usage of dividend
payments from the Guarantor’s subsidiaries may impact the Guarantor’s ability to fund its operations and to
service its indebtedness, including the Notes.
33
The implementation of PRC employment regulations may increase labour costs in the PRC generally.
The PRC Labour Contract Law ( ) became effective on 1 January 2008 in the PRC and
was amended on 28 December 2012. It imposes more stringent requirements on employers in relation to entry
into fixed-term employment contracts and dismissal of employees. Pursuant to the PRC Labour Contract Law,
the employer is required to make compensation payment to a fixed-term contract employee when the term of their
employment contract expires, unless the employee does not agree to renew the contract even though the
conditions offered by the employer for renewal are the same as or better than those stipulated in the current
employment contract. In general, the amount of compensation payment is equal to the monthly wage of the
employee multiplied by the number of full years that the employee has worked for the employer. A minimum
wage requirement has also been incorporated into the PRC Labour Contract Law. In addition, unless otherwise
prohibited by the PRC Labour Contract Law or objected to by the employees themselves, the employer is also
required to enter into non-fixed-term employment contracts with employees who have previously entered into
fixed-term employment contracts for two consecutive terms.
In addition, under the Regulations on Paid Annual Leave for Employees ( ), which became
effective on 1 January 2008, employees who have worked continuously for more than one year are entitled to
paid annual leave ranging from 5 to 15 days, depending on the length of the employees’ work time. Employees
who consent to waive such vacation at the request of employers shall be compensated an amount equal to three
times their normal daily salaries for each vacation day being waived. Under the National Leisure and Tourism
Outline 2013-2020 ( 2013-2020) which became effective on 2 February 2013, all workers must
receive paid annual leave by 2020. As a result of the PRC Labour Contract Law, the Regulations on Paid Annual
Leave for Employees and the National Leisure and Tourism Outline 2013-2020, the Group’s labour costs
(inclusive of those incurred by contractors) may increase. Further, under the PRC Labour Contract Law, when
an employer terminates its PRC employees’ employment, the employer may be required to compensate them for
such amount which is determined based on their length of service with the employer, and the employer may not
be able to efficiently terminate non-fixed-term employment contracts under the PRC Labour Contract Law
without cause. In the event the Group decides to significantly change or decrease its workforce, the PRC Labour
Contract Law could adversely affect its ability to effect these changes in a cost-effective manner or in the manner
that the Group desires, which could result in an adverse impact on the Group’s business, financial condition and
results of operations.
Further, in the event that there is a labour shortage or a significant increase to labour costs, the Group’s business
operation costs is likely to increase. In such circumstances, the profit margin may decrease and the financial
results may be adversely affected. In addition, inflation in the PRC has increased in recent years. Inflation in the
PRC increases the costs of raw materials required by the Group for conducting its business and the costs of labour
as well. Rising labour costs may increase the Group’s operating costs and partially erode the cost advantage of
the Group’s operations and therefore negatively impact the Group’s profitability.
There can be no assurance of the accuracy or comparability of facts and statistics contained in this
Offering Circular with respect to the PRC, its economy or the relevant industry.
Facts, forecasts and other statistics in this Offering Circular relating to the PRC, its economy or the relevant
industry in which the Group operates have been directly or indirectly derived from official government
publications and certain other public industry sources and although the Group believes such facts and statistics
are accurate and reliable, it cannot guarantee the quality or the reliability of such source materials. They have
not been prepared or independently verified by the Issuer, the Guarantor or the Agents or any of their respective
affiliates, directors, employees, agents, representatives, officers or advisers or any person who controls any of
them, and, therefore, none of the Issuer, the Guarantor or the Agents or any of its or their respective affiliates,
directors, employees, agents, representatives, officers or advisers or any person who controls any of them makes
no representation as to the completeness, accuracy or fairness of such facts or other statistics, which may not be
consistent with other information compiled within or outside the PRC. Due to possibly flawed or ineffective
collection methods or discrepancies between published information and market practice and other problems, the
statistics herein may be incomplete, inaccurate or unfair or may not be comparable to statistics produced for other
economies or the same or similar industries in other countries and should not be unduly relied upon. Furthermore,
there is no assurance that they are stated or compiled on the same basis or with the same degree of accuracy as
may be the case elsewhere. In all cases, investors should give consideration as to how much weight or importance
they should attach to or place on such facts or other statistics.
34
RISKS RELATING TO THE NOTES AND THE GUARANTEE
Any failure to complete the relevant filings under the NDRC Administrative Measures within the
prescribed time frame following the completion of the issue of the Notes may have adverse consequences
for the Issuer, the Guarantor and/or the investors of the Notes.
The NDRC issued the NDRC Circular on 14 September 2015, which came into effect on the same day. According
to the NDRC Circular, domestic enterprises and their overseas controlled entities shall procure the registration
of any debt securities issued outside the PRC with a maturity of more than one year with the NDRC prior to the
issue of the securities and notify the particulars of the relevant issues within 10 PRC working days after the
completion of the issue of the securities.
On 5 January 2023, the NDRC issued the NDRC Administrative Measures, which came into effect on 10
February 2023. On 9 February 2023, the NDRC published the FAQs, which provided further clarifications on the
practical implications of certain provisions in the NDRC Administrative Measures. The Guarantor will procure
NDRC pre-issuance registration certification to be obtained prior to the offering of the Notes with a maturity
more than one year and shall comply with the provisions relating to foreign debt risk management and interim
and ex-post supervision under the NDRC Administrative Measures.
If the Guarantor fails to obtain relevant NDRC pre-issuance registration certificate or report relevant information
according to the NDRC Administrative Measures when they are applicable, the examination and registration
authorities shall, depending on the seriousness of the circumstances, impose disciplinary measures such as
interviews and public warnings on the Guarantor concerned and its principal responsible person, etc. Potential
investors of the Notes are advised to exercise due caution when making their investment decisions.
If the Guarantor fails to complete registration with SAFE in connection with the Guarantee, there may be
logistical and practical hurdles for cross-border payments under the Guarantee.
The Guarantor will unconditionally and irrevocably guarantee the due and punctual payment of all sums from
time to time payable by the Issuer in respect of the Notes. The Guarantee will be contained in the Deed of
Guarantee to be executed on the Issue Date of the relevant Tranche of Notes. The Guarantor is required to submit
the Deed of Guarantee to SAFE within 15 PRC Business Days upon the execution of the Deed of Guarantee for
registration in accordance with the Foreign Exchange Administration Rules on Cross-Border Guarantees (
) promulgated by SAFE. Although non-registration would not as a matter of PRC law render
the Guarantee ineffective or invalid, SAFE may impose penalties on the Guarantor if registration is not carried
out within the stipulated time frame. The Guarantor intends to register the Guarantee as soon as practicable. If
the Guarantor fails to complete registration with SAFE, there may be logistical and practical hurdles at the time
of remittance of funds (if any cross-border payment is to be made by the Guarantor under the Guarantee) as
domestic banks may require evidence of registration with SAFE in connection with the Guarantee prior to giving
effect to any such remittance.
The Notes and the Guarantee are unsecured obligations.
As the Notes and the Guarantee are unsecured obligations of the Issuer and the Guarantor, respectively, the
repayment of the Notes and under the Guarantee, as the case may be, may be compromised if:
the Issuer or the Guarantor enters into bankruptcy, liquidation, reorganisation or other winding-up
proceedings;
there is a default in payment under the Issuer’s or the Guarantor’s secured indebtedness or other unsecured
indebtedness; or
there is an acceleration of any of the Issuer’s or the Guarantor’s indebtedness.
If any of these events were to occur, the Issuer’s or the Guarantor’s assets and any amounts received from the
sale of such assets may not be sufficient to pay amounts due on the Notes or the Guarantee.
35
The Notes may not be a suitable investment for all investors.
The Notes may be purchased as a way to reduce risk or enhance yield with a measured and appropriate addition
of risk to the investor’s overall portfolios. A potential investor should not invest in the Notes unless they have
the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under
changing conditions, the resulting effects on the value of such Notes and the impact this investment will have
on the potential investor’s overall investment portfolio.
Additionally, the investment activities of certain investors are subject to legal investment laws and regulations,
or review or regulation by certain authorities. Each potential investor should consult its legal advisers to
determine whether and to what extent (a) Notes are legal investments for it, (b) Notes can be used as collateral
for various types of borrowing and (c) other restrictions apply to its purchase of any Notes. Financial institutions
should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes
under any applicable risk-based capital or similar rules.
Each potential investor in the Notes must determine the suitability of that investment in light of its own
circumstances. In particular, each potential investor should:
have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks
of investing in the Notes and the information contained or incorporated by reference in this Offering Circular
or any applicable supplement;
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular
financial situation, an investment in the Notes and the impact such investment will have on its overall
investment portfolio;
have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes;
understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and
financial markets; and
be able to evaluate (either alone or with the help of a financial adviser) possible economic scenarios, such
as interest rate and other factors which may affect its investment and the ability to bear the applicable risks.
Notes issued under the Programme have no current active trading market and may trade at a discount to
their initial offering price and/or with limited liquidity.
Notes issued under the Programme will be new securities which may not be widely distributed and for which
there is currently no active trading market (unless in the case of any particular Tranche, such Tranche is to be
consolidated with and form a single series with a Tranche of Notes which is already issued). If the Notes are
traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon
prevailing interest rates, the market for similar securities, general economic conditions and the financial
condition of the Issuer, the Guarantor and the Group. If the Notes are traded at a discount, investors may not be
able to receive a favourable price for their Notes, and in some circumstances, investors may not be able to sell
their Notes at all or at their fair market value. Although application has been made to the Hong Kong Stock
Exchange for the listing of the Programme, and for the permission to deal in, and for the listing of, Notes issued
under the Programme within the 12-month period after the date of this Offering Circular on the Hong Kong Stock
Exchange, there is no assurance that such application will be accepted, that any particular Tranche of Notes will
be so admitted or that an active trading market will develop. In addition, the market for investment grade and
crossover grade debt has been subject to disruptions that have caused volatility in prices of securities similar to
the Notes issued under the Programme. Accordingly, there is no assurance as to the development or liquidity of
any trading market, or that disruptions will not occur, for any particular Tranche of Notes.
36
The liquidity and price of the Notes following the offering may be volatile.
The price and trading volume of the Notes may be highly volatile. Factors such as variations in the Issuer’s, the
Guarantor’s or the Group’s turnover, earnings and cash flows, proposals for new investments, strategic alliances
and/or acquisitions, changes in interest rates, fluctuations in price for comparable companies, changes in
government regulations and changes in general economic conditions nationally or internationally could cause the
price of the Notes to change. Any such developments may result in large and sudden changes in the trading
volume and price of the Notes. There is no assurance that these developments will not occur in the future.
Developments in other markets may adversely affect the market price of the Notes.
The market price of the Notes may be adversely affected by declines in the international financial markets and
world economic conditions. The market for the Notes is, to varying degrees, influenced by economic and market
conditions in other markets, especially those in Asia. Although economic conditions are different in each country,
investors’ reactions to developments in one country can affect the securities markets and the securities of issuers
in other countries, including the PRC. Since the global financial crisis in 2008 and 2009, the international
financial markets have experienced significant volatility. If similar developments occur in the international
financial markets in the future, the market price of the Notes could be adversely affected.
The Issuer is a specifically incorporated special purpose finance vehicle.
As of the date of this Offering Circular, the Issuer has not engaged, since its incorporation, in any material
activities other than those relating to the issue of U.S.$900,000,000 3.95 per cent. credit enhanced bonds due
2018, the CNY4,000,000,000 3.40 per cent. guaranteed bonds due 2026, and the issues of the Notes under the
Programme and the on-lending of the proceeds thereof to the Guarantor or its subsidiaries or affiliates, and the
authorisation of documents and agreements referred to in this Offering Circular to which it is or will be a party.
The Issuer does not and will not have any material assets other than amounts due to it from the Guarantor or its
subsidiaries, and its ability to make payments under the Notes will depend on their receipt of timely remittance
of funds from the Guarantor and/or its subsidiaries. The Issuer might not be able to receive sufficient funds from
the Guarantor and/or its subsidiaries to make payments under the Notes.
The Issuer may be unable to redeem the Notes upon the due date for redemption thereof.
On the Maturity Date, the Notes will be redeemed at their principal amount, or following the occurrence of an
event triggering the Noteholders’ right to require the Issuer to redeem all, but not some only, of such Noteholder’s
Notes. On the Maturity Date or if any such event were to occur, the Issuer may not have sufficient cash in hand
and may not be able to arrange financing to redeem the Notes in time, or on acceptable terms, or at all. The ability
to redeem the Notes on the Maturity Date or in any such event may also be limited by the terms of other debt
instruments. The Issuer’s failure to repay, repurchase or redeem tendered Notes could constitute an event of
default under the Notes, which may also constitute a default under the terms of the Issuer’s other indebtedness.
The Notes and the Guarantee will be structurally subordinated to the existing and future indebtedness and
other liabilities and commitments of the Issuer’s and the Guarantor’s existing and future subsidiaries and
effectively subordinated to the Issuer’s and the Guarantor’s secured debt to the extent of the value of the
collateral securing such indebtedness.
The Notes and the Guarantee will be structurally subordinated to any debt and other liabilities and commitments,
including trade payables and lease obligations, of the Issuer’s and the Guarantor’s existing or future subsidiaries
(in the case of the Guarantor’s subsidiaries other than the Issuer), whether or not secured. The Notes will not be
guaranteed by any of the Issuer’s or the Guarantor’s subsidiaries, and the Issuer and the Guarantor may not have
direct access to the assets of such subsidiaries unless these assets are transferred by dividend or otherwise to the
Issuer and the Guarantor. The ability of such subsidiaries to pay dividends or otherwise transfer assets to the
Issuer and the Guarantor is subject to various restrictions under applicable laws. The Issuer’s and the Guarantor’s
subsidiaries are and will be separate legal entities that have no obligation to pay any amounts due under the Notes
or make any funds available therefore, whether by dividends, loans or other payments. The Issuer’s and the
Guarantor’s right to receive assets of any of the Issuer’s and the Guarantor’s subsidiaries, respectively, upon that
subsidiary’s liquidation or reorganisation will be effectively subordinated to the claim of that subsidiary’s
creditors (except to the extent that the Issuer or the Guarantor is creditor of that subsidiary). Consequently, the
Notes will be effectively subordinated to all liabilities, including trade payables and lease obligations, of any
subsidiaries that the Issuer or the Guarantor may in the future acquire or establish.
37
The Notes will be the Issuer’s unsecured obligations and will (i) rank at least equally in right of payment with
all the Issuer’s other present and future unsecured and unsubordinated obligations; (ii) be effectively
subordinated to all of the Issuer’s present and future secured indebtedness to the extent of the value of the
collateral securing such obligations; and (iii) be senior to all of the Issuer’s present and future subordinated
obligations, subject in all cases to exceptions as may be provided by applicable laws and regulations. The
Guarantee is the Guarantor’s unsecured obligation and will (i) rank at least equally in right of payment with all
the Guarantor’s other present and future unsecured and unsubordinated obligations; (ii) be effectively
subordinated to all of the Guarantor’s present and future secured indebtedness to the extent of the value of the
collateral securing such obligations; and (iii) be senior to all of the Guarantor’s present and future subordinated
obligations, subject in all cases to exceptions as may be provided by applicable laws and regulations.
As a result, claims of secured lenders, whether senior or junior, with respect to assets securing their loans will
be prior with respect to those assets. In the event of the Issuer’s or the Guarantor’s bankruptcy, insolvency,
liquidation, reorganisation, dissolution or other winding up, or upon any acceleration of the Notes, these assets
will be available to pay obligations on the Notes and the Guarantee only after all other debt secured by these
assets has been repaid in full. Any remaining assets will be available to the Noteholders rateably with all of the
Issuer’s and the Guarantor’s other unsecured and unsubordinated creditors, including trade creditors. If there are
insufficient assets remaining to pay all these creditors, then all or a portion of the Notes then outstanding would
remain unpaid.
The insolvency laws of the British Virgin Islands and the PRC and other local insolvency laws may differ
from those of another jurisdiction with which the holders of the Notes are familiar.
As the Issuer is incorporated under the laws of the British Virgin Islands and the Guarantor is incorporated under
the laws of the PRC, any insolvency proceeding relating to the Issuer and the Guarantor would likely involve
insolvency laws of the British Virgin Islands or the PRC, as applicable, the procedural and substantive provisions
of which may differ from comparable provisions of the local insolvency laws of jurisdictions with which the
holders of the Notes are familiar.
If the Issuer or the Guarantor is unable to comply with the restrictions and covenants in its debt
agreements (if any), or the Notes, there could be a default under the terms of these agreements, or the
Notes, which could cause repayment of the Issuer’s or the Guarantor’s debt to be accelerated.
If the Issuer or the Guarantor is unable to comply with the restrictions and covenants in the Notes, or current or
future debt obligations and other agreements (if any), there could be a default under the terms of these
agreements. In the event of a default under these agreements, the holders of the debt could terminate their
commitments to lend to the Issuer or the Guarantor, accelerate repayment of the debt, declare all amounts
borrowed due and payable or terminate the agreements, as the case may be. Furthermore, some of the debt
agreements of the Issuer and the Guarantor contain cross-acceleration or cross-default provisions. As a result, the
default by the Issuer or the Guarantor under one debt agreement may cause the acceleration of repayment of debt,
including the Notes, or result in a default under its other debt agreements, including the Notes. If any of these
events occur, there can be no assurance that the Issuer’s or the Guarantor’s assets and cash flows would be
sufficient to repay all of the Issuer’s and the Guarantor’s indebtedness in full, or that it would be able to find
alternative financing. Even if the Issuer and the Guarantor could obtain alternative financing, there can be no
assurance that it would be on terms that are favourable or acceptable to the Issuer and the Guarantor.
A change in English law which governs the Notes may adversely affect Noteholders.
The Terms and Conditions of the Notes are governed by English law. No assurance can be given as to the impact
of any possible judicial decision or change English law or administrative practice after the date of issue of the
Notes.
38
Modifications and waivers may be made in respect of the Terms and Conditions of the Notes, the relevant
Deed of Guarantee and the Trust Deed by the Trustee or less than all of the Noteholders, and decisions may
be made on behalf of all Noteholders which may be adverse to the interests of the individual Noteholders.
The Terms and Conditions of the Notes provide that the Trustee may (but shall not be obliged to) agree (and is
entitled to rely on external opinions for this purpose), without the consent of the Noteholders, Receiptholders or
Couponholders (each as defined in “Terms and Conditions of the Notes”) to any modification of the Terms and
Conditions of the Notes or any of the provisions of the Trust Deed, the Agency Agreement or the relevant Deed
of Guarantee that is, in the opinion of the Trustee, of a formal, minor or technical nature or made to correct a
manifest error or to comply with any mandatory provision of law, and to any other modification (except as
mentioned in the Trust Deed or the relevant Deed of Guarantee), and any waiver or authorisation of any breach
or proposed breach by the Issuer or the Guarantor, of the Terms and Conditions of the Notes or any of the
provisions of the Trust Deed, the Agency Agreement or the relevant Deed of Guarantee that is in the opinion of
the Trustee not materially prejudicial to the interests of the Noteholders.
Furthermore, the Terms and Conditions of the Notes also contain provisions for calling meetings of Noteholders
to consider matters affecting their interests generally. These provisions permit defined majorities to bind all
Noteholders including holders who did not attend and vote at the relevant meeting and holders who voted in a
manner contrary to the majority. There is a risk that the decision of the majority of Noteholders may be adverse
to the interests of individual Noteholders.
Due to uncertainties in the interpretation of certain provisions of the new value added tax (“VAT”) regime,
the issuance of the Notes may be treated as provision of loans within the PRC that is subject to VAT, and
Issuer or the Guarantor may be required to withhold VAT and local levies from the payment of interest
income to Noteholders who are located outside of the PRC.
On 23 March 2016, MOF and SAT jointly issued the Circular of Full Implementation of Business Tax to
Value-added Tax Reform (Cai Shui [2016] No. 36) ( ( [2016]36
)) (“Circular 36”) which confirms that business tax will be completely replaced by VAT from 1 May 2016.
With effect from 1 May 2016, the income derived from the provision of financial services which previously
attracted business tax are entirely replaced by, and subject to, VAT.
According to Circular 36, the entities and individuals providing the services within PRC shall be subject to VAT.
The services are treated as being provided within PRC where either the service provider or the service recipient
is located in PRC. The services subject to VAT include the provision of financial services such as the provision
of loans. It is further clarified under Circular 36 that the “loans” refers to the activity of lending capital for
another’s use and receiving the interest income thereon. It is not clear from the interpretation of Circular 36, if
the provision of loans to the Issuer could be considered as financial services provided within the PRC, which thus
could be subject to VAT. Furthermore, there can be no assurance that the Issuer will not be treated as PRC tax
residents. PRC tax authorities could take the view that the holders of the Notes are providing loans within the
PRC because the Issuer is treated as PRC tax residents or because the Guarantor is located in PRC. In which case,
the issuance of the Notes could be regarded as the provision of financial services within the PRC that is subject
to VAT.
If the PRC tax authorities take the view that the holders of the Notes are providing loans within the PRC, then
the holders of the Notes could be regarded as providing financial services within PRC and consequently, the
holders of the Notes shall be subject to VAT at the rate of 6 per cent. when receiving the interest payments under
the Notes. In addition, the holders of the Notes shall be subject to the local levies at approximately 12 per cent.
of the VAT payment and consequently, the combined rate of VAT and local levies would be around 6.7 per cent.
In the event that the Issuer or the Guarantor pays interest income to Noteholders who are located outside of the
PRC, the Issuer or the Guarantor, acting as the obligatory withholder in accordance with applicable law, shall
withhold VAT and local levies from the payment of interest income to Noteholders who are located outside of
the PRC.
Where a holder of the Notes who is an entity or individual located outside of the PRC resells the Notes to an
entity or individual located outside of the PRC and derives any gain, since neither the service provider nor the
service recipient is located in the PRC, theoretically Circular 36 does not apply, and the Issuer or the Guarantor
does not have the obligation to withhold the VAT or the local levies. However, there is uncertainty as to the
applicability of VAT if either the seller or buyer of Notes is located within the PRC.
39
In addition, on 20 March 2019, MOF, SAT and the General Administration of Customs issued the Announcement
on Policies for Deepening the VAT Reform (Announcement [2019] No. 39 of the Ministry of Finance, the State
Taxation Administration and the General Administration of Customs) ( (
2019 39 )) (“Circular 39”). Circular 39 came into effect on 1 April 2019.
It further deepened the VAT reform by adjusting certain tax rates and the relevant calculation methods.
The above disclosure of Circular 36 and Circular 39 may be subject to further change upon the issuance of further
clarification rules and/or different interpretation by the competent tax authority. There is uncertainty as to the
application of Circular 36 and Circular 39.
The Issuer may be treated as a PRC resident enterprise for PRC tax purposes, which may subject the
Issuer to PRC income taxes on its worldwide income and PRC withholding taxes on interest the Issuer pays
on the Notes.
Under the new PRC Enterprise Income Tax Law (the “EIT Law”) and the implementation rules which both took
effect on 1 January 2008, enterprises established outside the PRC whose “de facto management bodies” are
located in the PRC are considered “resident enterprises” for PRC tax purposes.
The implementation rules define the term “de facto management body” as a management body that exercises full
and substantial control and management over the business, personnel, accounts and properties of an enterprise.
In April 2009, the State Administration of Taxation specified certain criteria for the determination of the “de facto
management bodies” for foreign enterprises that are controlled by PRC enterprises. The Issuer may hold its
shareholders’ meetings and certain board meetings outside the PRC and keep its shareholders’ list outside the
PRC. However, some of its directors and senior management are currently based inside the PRC and it may keep
its books of account inside the PRC. The above elements may be relevant for the tax authorities to determine
whether the Issuer is a PRC resident enterprise for tax purposes. However, there is no clear standard published
by the tax authorities for making such a determination.
Although it is unclear under PRC tax law whether the Issuer has a “de facto management body” located in China
for PRC tax purposes, as at the date of this Offering Circular, the Issuer has not been notified or informed by
the PRC tax authorities that it is considered as a PRC resident enterprise for the purposes of the EIT Law. There
is no assurance that the tax authorities will agree with such position. If the Issuer is deemed to be a PRC resident
enterprise for EIT purposes, the Issuer would be subject to the PRC enterprise income tax at the rate of 25% on
its worldwide taxable income.
Furthermore, pursuant to the EIT Law, the PRC Individual Income Tax Law (the “IIT Law”) which took effect
on 30 June 2011, and the implementation regulations in relation to both the EIT Law and IIT Law, the Issuer may
be obligated to withhold PRC income tax at a rate of 10 per cent. for non-resident enterprise Noteholders and
at a rate of 20 per cent. for non-resident individual Noteholders (or a lower treaty rate, if any) on payments of
interest and certain other amounts on the Notes to the non-resident Noteholders, because the interest and other
amounts may be regarded as being derived from sources within the PRC. In addition, if the Issuer fails to do so,
it may be subject to fines and other penalties. Similarly, any gain realised by such non-resident enterprise
investors from the transfer of the Notes may be regarded as being derived from sources within the PRC and may
accordingly be subject to withholding tax.
Noteholders should be aware that definitive Notes which have a denomination that is not an integral
multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
In relation to any issue of Notes which have a denomination consisting of a minimum Specified Denomination
plus a higher integral multiple of another smaller amount, it is possible that the Notes may be traded in amounts
in excess of the minimum Specified Denomination that are not integral multiples of such minimum Specified
Denomination. In such a case a Noteholder who, as a result of trading such amounts, holds a principal amount
of less than the minimum Specified Denomination will not receive a definitive Note in respect of such holding
(should definitive Notes be printed) and would need to purchase a principal amount of Notes such that it holds
an amount equal to one or more Specified Denominations. If definitive Notes are issued, holders should be aware
that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified
Denomination may be illiquid and difficult to trade.
40
The Notes may be redeemed by the Issuer prior to maturity.
The Issuer may redeem the Notes at its option, in whole but not in part, at a redemption price equal to an Early
Redemption Amount (as described in Condition 6(b) (Early Redemption) of the Terms and Conditions of the
Notes), together with any unpaid interest accrued to but excluding the date fixed for redemption if, subject to
certain conditions, as a result of a change in tax law, the Issuer (or if the Guarantee were called, the Guarantor)
has or will become obliged to pay Additional Tax Amounts (as defined in the Terms and Conditions of the Notes),
as further described in Condition 6(c) (Redemption for Taxation Reasons) of the Terms and Conditions of the
Notes. The Notes may also be redeemed before their stated maturity at the option of the Issuer to the extent (if
at all) specified in the relevant Pricing Supplement, as further described in Condition 6(e) (Redemption at the
Option of the Issuer (Call Option)) of the Terms and Conditions of the Notes.
If the Issuer redeems the Notes prior to their Maturity Date, investors may not receive the same economic
benefits they would have received had they held the Notes to maturity, and they may not be able to reinvest the
proceeds they receive in a redemption in similar securities. In addition, the Issuer’s ability to redeem the Notes
may reduce the market price of the Notes.
The ratings of the Programme may be downgraded or withdrawn.
The Programme is expected to be assigned a rating of “BBB” by S&P. The ratings represent the opinions of the
rating agencies and their assessment of the ability of the Issuer and the Guarantor to perform their respective
obligations under the Notes and the Guarantee and credit risks in determining the likelihood that payments will
be made when due under the Notes. Ratings are not recommendations to buy, sell or hold the Notes and may be
subject to revision, qualification, suspension, reduction or withdrawn at any time. There is no assurance that a
rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by the
relevant rating agency if in its judgment circumstances in the future so warrant. Each rating should be evaluated
independently of any other rating of the Notes or other securities of the Issuer or the Guarantor (if any). A
revision, qualification, suspension or withdrawal at any time of any rating assigned to the Notes may adversely
affect the market price of the Notes.
The Trustee may request the Noteholders to provide an indemnity and/or security and/or prefunding to its
satisfaction.
In certain circumstances (including, without limitation, giving notice to the Issuer and the Guarantor pursuant
to Condition 9 (Events of Default) of the Terms and Conditions of the Notes and taking action and/or steps and/or
instituting proceedings pursuant to Condition 14 (Enforcement) of the Terms and Conditions of the Notes), the
Trustee may (at its sole discretion) request Noteholders to provide an indemnity and/or security and/or
prefunding to its satisfaction before it takes actions and/or steps and/or institutes proceedings on behalf of the
Noteholders. The Trustee shall not be obliged to take any such actions and/or steps and/or to institute any such
proceedings if not first indemnified and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing
to an indemnity and/or security and/or prefunding can be a lengthy process and may impact on when such actions
and/or steps can be taken and/or when such proceedings can be instituted. The Trustee may not be able to take
actions and/or steps and/or to institute proceedings, notwithstanding the provision of an indemnity or security or
prefunding to it, in breach of the terms of the Trust Deed constituting the Notes and in such circumstances, or
where there is uncertainty or dispute as to the applicable laws or regulations, to the extent permitted by the
agreements and the applicable laws and regulations, it will be for the Noteholders to take such actions and/or
steps and/or to institute such proceedings directly.
Notes subject to optional redemption by the Issuer may have a lower market value than Notes that cannot
be redeemed.
An optional redemption feature is likely to limit the market value of Notes. During any period when the Issuer
may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price
at which they can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected
to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At such times, an investor
generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest
rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors
should consider reinvestment risk in light of other investments available at that time.
41
The Notes are redeemable in the event of certain withholding taxes being applicable.
No assurances are made by the Issuer or the Guarantor as to whether or not payments on the Notes may be made
without withholding taxes or deductions applying from the date on which agreement is reached to issue the first
Tranche of Notes for or on account of any taxes, duties, assessments or governmental charges of whatever nature
imposed, levied, collected, withheld or assessed by or within the British Virgin Islands or the PRC or any
subdivision or authority therein or thereof having power to tax. Although, pursuant to the Terms and Conditions
of the Notes, the Issuer and the Guarantor are required to gross up payments on account of any such withholding
taxes or deductions, the Issuer also has the right to redeem the Notes at any time in the event it, or the Guarantor,
as the case may be, has or will become obliged to pay additional amounts on account of any existing or future
withholding or deduction for any taxes, duties, assessments or governmental charges of whatever nature imposed,
levied, collected, withheld or assessed by or within the British Virgin Islands or the PRC or any political
subdivision or any authority therein or thereof having power to tax (only where such tax or withholding is in
excess of the rate applicable on the date on which agreement is reached to issue the first Tranche of the Notes)
as a result of any change in, or amendment to, the laws or regulations of the British Virgin Islands or the PRC
or any political subdivision or any authority therein or thereof having power to tax, or any change in the
application or official interpretation of such laws or regulations (including a holding by a court of competent
jurisdiction), which change or amendment becomes effective on or after the date on which agreement is reached
to issue the first Tranche of the Notes.
The Notes may be represented by Global Notes or Global Certificates and holders of a beneficial interest
in a Global Note or Global Certificate must rely on the procedures of the relevant Clearing System(s).
The Notes issued under the Programme may be represented by one or more Global Notes (in the case of Bearer
Notes) or Global Certificates (in the case of Registered Notes). Such Global Notes and Global Certificates will
be deposited with a common depositary for Euroclear and Clearstream or lodged with a sub-custodian the CMU
(each of Euroclear, Clearstream and the CMU, a “Clearing System”). Except in the circumstances described in
the relevant Global Note or Global Certificate, investors will not be entitled to receive definitive Notes. The
relevant Clearing System(s) will maintain records of the beneficial interests in the Global Notes or Global
Certificates. While the Notes are represented by one or more Global Notes or Global Certificates, investors will
be able to trade their beneficial interests only through the Clearing System(s).
While the Notes are represented by one or more Global Notes or Global Certificates, the Issuer or, failing which,
the Guarantor, will discharge its payment obligations under the Notes by making payments to the relevant
Clearing System(s) for distribution to their account holders or, in the case of the CMU, to the persons for whose
account(s) interests in such Global Note or Global Certificate are credited as being held in the CMU in
accordance with the CMU Rules at the relevant time.
A holder of a beneficial interest in a Global Note or Global Certificate must rely on the procedures of the relevant
Clearing System(s) to receive payments under the relevant Notes. Neither the Issuer nor the Guarantor has any
responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the
Global Notes or Global Certificates.
Holders of beneficial interests in the Global Notes or Global Certificates will not have a direct right to vote in
respect of the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are
enabled by the relevant Clearing System(s) to appoint appropriate proxies. Similarly, holders of beneficial
interests in the Global Notes or Global Certificates will not have a direct right under the relevant Global Notes
or Global Certificates to take enforcement action against the Issuer or the Guarantor in the event of a default
under the relevant Notes but will have to rely upon their rights under the Trust Deed.
Exchange rate risks and exchange controls may result in a Noteholder receiving less interest or principal
than expected.
The Issuer will pay principal and interest on the Notes in the currency specified in the relevant Pricing
Supplement (the “Specified Currency”). This presents certain risks relating to currency conversions if a
Noteholder’s financial activities are denominated principally in a currency or currency unit (the “Investor’s
Currency”) other than the Specified Currency. These include the risk that exchange rates may significantly
change (including changes due to devaluation of the Specified Currency or revaluation of the Investor’s
Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify
exchange controls. An appreciation in the value of the Investor’s Currency relative to the Specified Currency
would decrease: (i) the Investor’s Currency equivalent yield on the Notes; (ii) the Investor’s Currency equivalent
value of the principal payable on the Notes; and (iii) the Investor’s Currency equivalent market value of the
Notes.
Governments and monetary authorities may impose (as some have done in the past) exchange controls that could
adversely affect an applicable exchange rate. As a result, a Noteholder may receive less interest or principal than
expected, or no interest or principal.
42
Changes in market interest rates may adversely affect the value of Fixed Rate Notes.
Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely
affect the value of Fixed Rate Notes.
The credit ratings assigned to the Notes may not reflect all risks.
One or more independent credit rating agencies may assign credit ratings to an issue of Notes. The ratings
represent the opinions of the rating agencies and their assessment of the ability of the Issuer and the Guarantor
to perform their respective obligations under the Notes and the credit risks in determining the likelihood that
payments will be made when due under the Notes. Such ratings may not reflect the potential impact of all risks
related to structure, market, additional factors discussed above and other factors that may affect the value of the
Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn
by the rating agency at any time. There can be no assurance that the ratings assigned to any Notes will remain
in effect for any given period or that the ratings will not be lowered, suspended or withdrawn by the rating
agencies in the future if, in their judgement, the circumstances so warrant. Neither the Issuer nor the Guarantor
is obligated to inform holders of the Notes of any such suspension, revision, downgrade or withdrawal. A
suspension, downgrade or withdrawal of the ratings of any Notes at any time may materially and adversely affect
the market price of the Notes and the Issuer’s and the Guarantor’s ability to access the debt capital markets.
RISKS RELATING TO THE STRUCTURE OF A PARTICULAR ISSUE OF NOTES UNDER THE
PROGRAMME
A wide range of Notes may be issued under the Programme. A number of these Notes may have features which
contain particular risks for potential investors. Set out below is a description of certain such features:
Dual Currency Notes have features which are different from single currency issues.
The Issuer may issue Notes with principal or interest payable in one or more currencies which may be different
from the currency in which the Notes are denominated. Potential investors should be aware that:
the market price of such Notes may be volatile;
they may receive no interest;
payment of principal or interest may occur at a different time or in a different currency than expected; and
the amount of principal payable at redemption may be less than the principal amount of such Notes or even
zero.
Failure to pay a subsequent instalment of Partly-Paid Notes may result in an investor losing all of its
investment.
The Issuer may issue Notes where the issue price is payable in more than one instalment. Failure to pay any
subsequent instalments could result in an investor losing all of its investment.
The market price of variable rate Notes with a multiplier or other leverage factor may be volatile.
Notes with variable interest rates can be volatile securities. If they are structured to include multipliers or other
leverage factors, or caps or floors, or any combination of those features or other similar related features, their
market values may be even more volatile than those for securities that do not include such features.
The value of, and return on, Floating Rate Notes linked to or referencing indices may be adversely affected
in the event of a permanent discontinuation of such indices.
Where Screen Rate Determination is specified as the manner in which the Rate of Interest in respect of Floating
Rate Notes is to be determined, the Terms and Conditions of the Notes provide that the Rate of Interest shall be
determined by reference to the Relevant Screen Page (or its successor or replacement). In circumstances where
such Original Reference Rate is discontinued, neither the Relevant Screen Page, nor any successor or
replacement may be available.
43
Furthermore, if a Successor Rate or an Alternative Rate for the Original Reference Rate is determined by the
Independent Adviser, the Terms and Conditions of the Notes provide that the Issuer may vary the Terms and
Conditions of the Notes, as necessary to ensure the proper operation of such Successor Rate or Alternative Rate,
without any requirement for consent or approval of the Noteholders.
If a Successor Rate or an Alternative Rate is determined by the Independent Adviser, the Terms and Conditions
of the Notes also provide that an Adjustment Spread will be determined by the Independent Adviser and applied
to such Successor Rate or Alternative Rate.
The Adjustment Spread is (i) the spread, formula or methodology which, in the case of a Successor Rate, is
formally recommended, or formally provided as an option for parties to adopt, in relation to the replacement of
the Original Reference Rate with the Successor Rate by any Relevant Nominating Body (which may include a
relevant central bank, supervisory authority or group of central banks/supervisory authorities), (ii) if no such
recommendation has been made, or in the case of an Alternative Rate, the spread, formula or methodology which
the Issuer, following consultation with the Independent Adviser, determines, is customarily applied to the
relevant Successor Rate or the Alternative Rate (as the case may be) in international debt capital markets
transactions to produce an industry-accepted replacement rate for the Original Reference Rate, or (iii) if the
Issuer determines that no such spread is customarily applied, the spread, formula or methodology which the
Issuer, following consultation with the Independent Adviser determines and which is recognised or
acknowledged as being the industry standard for over-the-counter derivative transactions which reference the
Original Reference Rate, where such rate has been replaced by the Successor Rate or the Alternative Rate, as the
case may be, or (iv) if the Issuer determines that no such industry standard is recognised or acknowledged, the
Issuer, following consultation with the Independent Adviser, determines the spread, formula or methodology to
be appropriate to reduce or eliminate, to the extent reasonably practicable in the circumstances, any economic
prejudice or benefit (as the case may be) to Noteholders as a result of the replacement of the Original Reference
Rate with the Successor Rate or the Alternative Rate, as the case may be.
Accordingly, the application of an Adjustment Spread may result in the Notes performing differently (which may
include payment of a lower Rate of Interest) than they would do if the Original Reference Rate were to continue
to apply in its current form.
The Issuer may be unable to appoint an Independent Adviser or the Issuer may not be able to determine a
Successor Rate or an Alternative Rate in accordance with the Terms and Conditions of the Notes.
Where the Issuer is unable to appoint an Independent Adviser, or the Issuer fails to determine a Successor Rate
or, failing which, an Alternative Rate prior to the relevant Interest Determination Date, the Reference Rate
applicable to the immediate following Interest Accrual Period shall be the Reference Rate applicable as at the
last preceding Interest Determination Date. If there has not been a first Interest Payment Date, the Reference Rate
shall be the Reference Rate applicable to the first Interest Period.
If the Issuer is unable to appoint an Independent Adviser or the Issuer fails to determine a Successor Rate or an
Alternative Rate for the life of the relevant Notes, the first Interest Period, or the Reference Rate applicable as
at the last preceding Interest Determination Date, will continue to apply to maturity. This will result in the
floating rate Notes, in effect, becoming fixed rate Notes.
Where ISDA Determination is specified as the manner in which the Rate of Interest in respect of floating rate
Notes is to be determined, the Terms and Conditions of the Notes provide that the Rate of Interest in respect of
the Notes shall be determined by reference to the relevant Floating Rate Option in the ISDA Definitions. Where
the Floating Rate Option specified is an “IBOR” Floating Rate Option, the Rate of Interest may be determined
by reference to the relevant screen rate or the rate determined on the basis of quotations from certain banks. If
the relevant IBOR is permanently discontinued and the relevant screen rate or quotations from banks (as
applicable) are not available, the operation of these provisions may lead to uncertainty as to the Rate of Interest
that would be applicable, and may, adversely affect the value of, and return on, the floating rate Notes.
44
Inverse Floating Rate Notes are typically more volatile than conventional floating rate debt.
Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate.
The market values of such Notes typically are more volatile than market values of other conventional floating
rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating
Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the
Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market
value of these Notes.
Certain benchmark rates, including EURIBOR, may be discontinued or reformed in the future.
Interest rates and indices such as the Euro Interbank Offered Rate (“EURIBOR”) and other indices which are
deemed to be or used as “benchmarks”, are the subject of recent national, international regulatory and other
regulatory guidance and proposals for reform.
Some of these reforms are already effective whilst others are still to be implemented. These reforms may cause
such benchmarks to perform differently than in the past or to disappear entirely, or have other consequences
which cannot be predicted. Any such consequence could have a material adverse effect on any Note linked to or
referencing such a benchmark.
Regulation (EU) No. 2016/1011 (the “EU Benchmarks Regulation”) applies, subject to certain transitional
provisions, to the provision of benchmarks, the contribution of input data to a benchmark and the use of a
benchmark, within the EU. Regulation (EU) No. 2016/1011 as it forms part of domestic law of the United
Kingdom by virtue of the EUWA (the “UK Benchmarks Regulation”) applies to the provision of benchmarks,
the contribution of input data to a benchmark and the use of a benchmark, within the UK. The EU Benchmarks
Regulation or the UK Benchmarks Regulation, as applicable, could have a material impact on any Notes linked
to EURIBOR or another benchmark rate or index, in particular, if the methodology or other terms of the
benchmark are changed in order to comply with the terms of the EU Benchmarks Regulation or UK Benchmarks
Regulation, and such changes could (amongst other things) have the effect of reducing or increasing the rate or
level, or affecting the volatility of the published rate or level, of the benchmark.
More broadly, any of the international, national, or other proposals, for reforms or the general increased
regulatory scrutiny of benchmarks, could increase the costs and risks of administering or otherwise participating
in the setting of a benchmark and complying with any such regulations or requirements.
On 29 November 2017, the Bank of England and the FCA announced that, from January 2018, its Working Group
on Sterling Risk-Free Rates has been mandated with implementing a broad-based transition to the Sterling
Overnight Index Average (“SONIA”) over the next four years across sterling bond, loan and derivative markets,
so that SONIA is established as the primary sterling interest rate benchmark by the end of 2021.
Separate workstreams are also underway in Europe to reform EURIBOR using a hybrid methodology and to
provide a fallback by reference to a euro risk-free rate (based on a euro overnight risk-free rate as adjusted by
a methodology to create a term rate). On 13 September 2018, the working group on euro risk-free rates
recommended Euro Short-term Rate (“ESTR”) as the new risk free rate. In addition, on 21 January 2019, the euro
risk free-rate working group published a set of guiding principles for fallback provisions in new euro
denominated cash products (including bonds). The guiding principles indicate, among other things, that
continuing to reference EURIBOR in relevant contracts may increase the risk to the euro area financial system.
It is not possible to predict with certainty whether, and to what extent, EURIBOR will continue to be supported
going forwards. This may cause EURIBOR to perform differently than they have done in the past, and may have
other consequences which cannot be predicted. Such factors may have (without limitation) the following effects
on certain benchmarks: (i) discouraging market participants from continuing to administer or contribute to a
benchmark; (ii) triggering changes in the rules or methodologies used in the benchmark and/or (iii) leading to
the disappearance of the benchmark. Any of the above changes or any other consequential changes as a result
of international or national reforms or other initiatives or investigations, could have a material adverse effect on
the value of and return on any Notes linked to, referencing, or otherwise dependent (in whole or in part) upon,
a benchmark.
45
Investors should be aware that, if EURIBOR were discontinued or otherwise unavailable, the rate of interest on
Floating Rate Notes which reference EURIBOR will be determined for the relevant period by the fallback
provisions applicable to such Notes. Depending on the manner in which EURIBOR is to be determined under the
Conditions, this may in certain circumstances (i) be reliant upon the provision by reference banks of offered
quotations for EURIBOR which, depending on market circumstances, may not be available at the relevant time
or (ii) result in the effective application of a fixed rate for Floating Rate Notes based on the rate which was last
observed on the Relevant Screen Page. Any of the foregoing could have an adverse effect on the value or liquidity
of, and return on, any Floating Rate Notes which reference EURIBOR.
Investors should consult their own independent advisers and make their own assessment about the potential risks
imposed by the Benchmarks Regulation or any of the international or national reforms in making any investment
decision with respect to any Notes referencing a benchmark.
The market continues to develop in relation to risk-free rates (including overnight rates) as reference rates
for Floating Rate Notes.
The use of risk-free rates, including those such as the Secured Overnight Financing Rate (“SOFR”), as reference
rates for Eurobonds continues to develop. This relates not only to the substance of the calculation and the
development and adoption of market infrastructure for the issuance and trading of bonds referencing such rates,
but also how widely such rates and methodologies might be adopted.
The market or a significant part thereof may adopt an application of risk-free rates that differs significantly from
that set out in the Terms and Conditions of the Notes and used in relation to Notes that reference risk-free rates
issued under the Programme. The Issuer may in the future also issue Notes referencing SOFR or the Compounded
SOFR Index that differ materially in terms of interest determination when compared with any previous Notes
issued by it under the Programme. The development of risk-free rates for the Eurobond markets could result in
reduced liquidity or increased volatility, or could otherwise affect the market price of any Notes that reference
a risk-free rate issued under this Programme from time to time.
In addition, the manner of adoption or application of risk-free rates in the Eurobond markets may differ
materially compared with the application and adoption of risk-free rates in other markets, such as the derivatives
and loan markets. Investors should carefully consider how any mismatch between the adoption of such reference
rates in the bond, loan and derivatives markets may impact any hedging or other financial arrangements which
they may put in place in connection with any acquisition, holding or disposal of Notes referencing such risk-free
rates.
In particular, investors should be aware that several different methodologies have been used in risk-free rate
notes issued to date. No assurance can be given that any particular methodology, including the compounding
formula in the Terms and Conditions of the Notes, will gain widespread market acceptance. In addition, market
participants and relevant working groups are still exploring alternative reference rates based on risk-free rates,
including various ways to produce term versions of certain risk-free rates (which seek to measure the market’s
forward expectation of an average of these reference rates over a designated term, as they are overnight rates)
or different measures of such risk-free rates. If the relevant risk-free rates do not prove to be widely used in
securities like the Notes, the trading price of such Notes linked to such risk-free rates may be lower than those
of Notes referencing indices that are more widely used.
Investors should consider these matters when making their investment decision with respect to any Notes which
reference SOFR or any risk free rates.
The administrator of SOFR or any related indices may make changes that could change the value of SOFR
or any related index, or discontinue SOFR or any related index.
The Federal Reserve or the Bank of New York (or their successors) as administrators of SOFR (and the
Compounded SOFR Index), may make methodological or other changes that could change the value of these
risk-free rates and/or indices, including changes related to the method by which such risk-free rate is calculated,
eligibility criteria applicable to the transactions used to calculate SOFR, or timing related to the publication of
SOFR or any related indices. In addition, the administrator may alter, discontinue or suspend calculation or
dissemination of SOFR or any related index (in which case a fallback method of determining the interest rate on
the Notes will apply). The administrator has no obligation to consider the interests of Noteholders when
calculating, adjusting, converting, revising or discontinuing any such risk-free rate.
46
Notes carrying an interest rate which may be converted from fixed to floating interest rates and vice versa,
may have lower market values than other Notes.
Fixed Rate Notes and Floating Rate Notes (as defined in the Terms and Conditions of the Notes) may bear interest
at a rate that the Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed
rate. The Issuer’s ability to convert the interest rate will affect the secondary market and the market value of such
Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of
borrowing. If the Issuer converts from a fixed rate to a floating rate, the spread on the Fixed Rate Notes may be
less favourable than then-prevailing spreads on comparable Floating Rate Notes tied to the same reference rate.
In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts
from a floating rate to a fixed rate, the fixed rate may be lower than then-prevailing rates on its Notes.
The market prices of Notes issued at a substantial discount or premium tend to fluctuate more in relation to
general changes in interest rates than prices for conventional interest-bearing securities do.
The market values of securities issued at a substantial discount or premium to their principal amount tend to
fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing
securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared
to conventional interest-bearing securities with comparable maturities.
RISKS RELATING TO RENMINBI-DENOMINATED NOTES
Notes denominated in Renminbi (“Renminbi Notes”) may be issued under the Programme. Renminbi Notes
contain particular risks for potential investors.
Renminbi is not freely convertible; there are significant restrictions on remittance of Renminbi into and
out of the PRC.
Renminbi is not freely convertible at present. The government of the PRC (the “PRC Government”) continues
to regulate conversion between Renminbi and foreign currencies, including the Hong Kong dollar, despite
significant reduction in control by it in recent years over trade transactions involving import and export of goods
and services as well as other frequent routine foreign exchange transactions. These transactions are known as
current account items.
Remittance of Renminbi into and out of the PRC for the purposes of capital account items, such as capital
contributions, debt financing and securities investment, is generally only permitted upon obtaining specific
approvals from, or completing specific registrations or filings with, the relevant authorities and is subject to a
strict monitoring system. Regulations in the PRC on the remittance of Renminbi into and out of the PRC for
settlement of capital account items are being adjusted from time to time to match the policies of the PRC
Government.
In respect of Renminbi foreign direct investments (“FDI”), PBOC promulgated the Administrative Measures on
Renminbi Settlement of Foreign Direct Investment ( ) (the “PBOC FDI
Measures”) on 13 October 2011, which was amended on 5 June 2015, as part of PBOC’s detailed Renminbi FDI
accounts administration system. The system covers almost all aspects in relation to FDI, including capital
injections, payments for the acquisition of PRC domestic enterprises, repatriation of dividends and other
distributions, as well as Renminbi denominated cross-border loans. On 14 June 2012, the PBOC issued a circular
setting out the operational guidelines for FDI, which was amended on 5 June 2015. Under the PBOC FDI
Measures, special approval for FDI and shareholder loans from the PBOC, which was previously required, is no
longer necessary. In some cases, however, post-event filing with the PBOC is still necessary.
On 3 December 2013, the Ministry of Commerce of the PRC (“MOFCOM”) promulgated the Circular on Issues
in relation to Cross-border Renminbi Foreign Direct Investment ( ) (the
“MOFCOM Circular”), which became effective on 1 January 2014, to further facilitate FDI by simplifying and
streamlining the applicable regulatory framework. Pursuant to the MOFCOM Circular, the appropriate office of
MOFCOM and/or its local counterparts will grant written approval for each FDI and specify “Renminbi Foreign
Direct Investment” and the amount of capital contribution in the approval. Unlike previous MOFCOM
47
regulations on FDI, the MOFCOM Circular removes the approval requirement for foreign investors who intend
to change the currency of their existing capital contribution from a foreign currency to Renminbi. In addition,
the MOFCOM Circular also clearly prohibits the FDI funds from being used for any investment in securities and
financial derivatives (except for investment in the PRC listed companies as strategic investors) or for entrustment
loans in the PRC.
On 13 February 2015, the SAFE promulgated the Notice on Further Simplifying and Improving Foreign
Exchange Administration Policies for Direct Investment ( )
(“Circular 13”), which was amended on 30 December 2019, to simplify foreign exchange rules for cross-border
investments. According to Circular 13, foreign exchange registration for foreign direct investment and outbound
direct investment will be exempted from the approval by the SAFE and the registration rights will be delegated
from the SAFE to the qualified banks from 1 June 2015. Under the Circular 13, foreign investors could open
foreign exchange accounts in qualified banks directly after providing the banks with registration documents, with
no need to obtain separate government approval. Under Circular 13, such qualified banks will administer foreign
exchange transactions according to the registration information provided by the parties and the SAFE will
indirectly supervise foreign exchange registration by verifying and inspecting the qualified banks.
On 30 March 2015, the SAFE promulgated the Circular of the SAFE on Relevant Issues Concerning the Reform
of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises
( ) (“Circular 19”), which was amended
on 9 June 2016 and 30 December 2019 and relaxed the capital account settlement for all foreign invested
enterprises across the nation from 1 June 2015.
On 9 June 2016, the SAFE further promulgated the Circular of the SAFE on Relevant Issues Concerning the
Reform and Regulation of the Administrative Policies of the Conversion under Capital Items (
) (“Circular 16”). According to Circular 16, in case of any
discrepancy between Circular 19 and Circular 16, Circular 16 shall prevail. Circular 16 allows all foreign
invested enterprises across the PRC to convert 100 per cent. (subject to future adjustment at discretion of SAFE)
of the foreign currency capital (which has been processed through the SAFE’s equity interest confirmation
procedure for capital contribution in cash or registered by a bank on the SAFE’s system for account crediting for
such capital contribution) into Renminbi at their own discretion without providing various supporting documents.
However, to use the converted Renminbi, a foreign invested enterprise still needs to provide supporting
documents and go through the review process with the banks for each withdrawal. A negative list with respect
to the usage of the capital and the Renminbi proceeds through the aforementioned settlement procedure is set
forth under the Circular 16.
In addition, pursuant to the Notice of SAFE on Improving the Check of Authenticity and Compliance to Further
Promote Foreign Exchange Control ( )
(“Circular No. 3 [2017]”) promulgated on 26 January 2017, when conducting outward remittance of a sum
equivalent to more than U.S.$50,000 for a domestic institution, the bank shall, under the principle of genuine
transaction, check the profit distribution resolution made by the board of directors (or profit distribution
resolution made by partners), original of tax filing form and audited financial statements, and stamp with the
outward remittance sum and date on the original of tax filing form. In addition, the domestic institution shall
make up its losses of previous years under the applicable laws. On 24 March 2017 and 27 April 2017, the SAFE
respectively posted two series of questions and answers on its official website, in order to further explain the
Circular No. 3 [2017].
On 5 January 2018, the PBOC promulgated the Notice on Further Improving Policies of Cross-Border Renminbi
Business to Promote Trade and Investment Facilitation (
) (“Circular No. 3 [2018]”), which supports enterprises to use Renminbi in cross-border settlement and
for the investment income such as profits and dividends legally obtained by overseas investors in the PRC, banks
shall review relevant materials as required before processing cross-border Renminbi settlement and ensure free
remittance of profits of foreign investors in accordance with the law.
As these are relatively new circulars, they will be subject to interpretation and application by the relevant
authorities in the PRC.
48
There is no assurance that the PRC Government will continue to gradually liberalise control over cross-border
remittance of Renminbi in the future, that any pilot schemes for Renminbi cross-border utilisation will not be
discontinued or that new regulations in the PRC will not be promulgated in the future which have the effect of
restricting or eliminating the remittance of Renminbi into or outside the PRC. In the event that funds cannot be
repatriated outside the PRC in Renminbi, this may affect the overall availability of Renminbi outside the PRC
and the ability of the Issuer and the Guarantor to source Renminbi to finance their obligations under Notes
denominated in Renminbi.
There is only limited availability of Renminbi outside the PRC, which may affect the liquidity of Renminbi
Notes and the Issuer’s ability to source Renminbi outside the PRC to service such Renminbi Notes.
As a result of the restrictions by the PRC Government on cross-border Renminbi fund flows, the availability of
Renminbi outside of the PRC is limited. Since February 2004, in accordance with arrangements between the PRC
central government and the Hong Kong government, licensed banks in Hong Kong may offer limited Renminbi
denominated banking services to Hong Kong residents and specified business customers. The PBOC has also
established a Renminbi clearing and settlement system for participating banks in Hong Kong. On July 2010,
further amendments were made to the Settlement Agreement on the Clearing of Renminbi Business (
) (the “Settlement Agreement”) between the PBOC and Bank of China (Hong Kong) Limited
(the “Renminbi Clearing Bank”) to further expand the scope of Renminbi business for participating banks in
Hong Kong. Pursuant to the revised arrangements, all corporations are allowed to open Renminbi accounts in
Hong Kong; there is no longer any limit on the ability of corporations to convert Renminbi; and there will no
longer be any restriction on the transfer of Renminbi funds between different accounts in Hong Kong. In addition,
the PBOC has now established Renminbi clearing and settlement systems with financial institutions in other
major global financial centres (each also a “Renminbi Clearing Bank”), including London, Frankfurt and
Singapore to further internationalise the Renminbi.
There are restrictions imposed by the PBOC on Renminbi business participating banks in respect of cross-border
Renminbi settlement, such as those relating to direct transactions with PRC enterprises. Furthermore, Renminbi
business participating banks do not have direct Renminbi liquidity support from the PBOC, although the PBOC
has gradually allowed participating banks to access the PRC’s onshore inter-bank market for the purchase and
sale of Renminbi. The Renminbi Clearing Banks only have limited access to onshore liquidity support from the
PBOC for the purpose of squaring open positions of participating banks for limited types of transactions and are
not obliged to square for participating banks any open positions resulting from other foreign exchange
transactions or conversion services. In such cases, where the participating banks cannot source sufficient
Renminbi through the above channels, the participating banks will need to source Renminbi from outside the
PRC to square such open positions.
Although it is expected that the offshore Renminbi market will continue to grow in depth and size, its growth
is subject to many constraints as a result of PRC laws and regulations on foreign exchange. There is no assurance
that new PRC regulations will not be promulgated or the settlement arrangements will not be terminated or
amended in the future which will have the effect of restricting availability of Renminbi outside the PRC. The
limited availability of Renminbi outside the PRC may affect the liquidity of the Renminbi Notes. To the extent
the Issuer or the Guarantor is required to source Renminbi in the offshore market to service its Renminbi Notes,
there is no assurance that either the Issuer or the Guarantor will be able to source such Renminbi on satisfactory
terms, if at all.
Payments in respect of Renminbi Notes will only be made to investors in the manner specified in such
Renminbi Notes.
All payments to investors in respect of Renminbi Notes will be made solely (i) when Renminbi Notes are
represented by Global Notes or Global Certificates, by transfer to a Renminbi bank account maintained in Hong
Kong in accordance with prevailing CMU rules and procedures, or (ii) when Renminbi Notes are in definitive
form, by transfer to a Renminbi bank account maintained in Hong Kong in accordance with prevailing rules and
regulations. The Issuer or the Guarantor (as the case may be) cannot be required to make payment by any other
means (including in any other currency or in bank notes, by cheque or draft or by transfer to a bank account in
the PRC).
49
TERMS AND CONDITIONS OF THE NOTES
The following is the text of the terms and conditions that, save for the words in italics and subject to completion
and amendment and as supplemented or varied in accordance with the provisions of the relevant Pricing
Supplement, shall be applicable to the Notes in definitive form (if any) issued in exchange for the Global Note(s)
or the Global Certificate(s) representing each Series. Either (i) the full text of these terms and conditions
together with the relevant provisions of the Pricing Supplement or (ii) these terms and conditions as so
completed, amended, supplemented or varied (and subject to simplification by the deletion of non-applicable
provisions), shall be endorsed on such Bearer Notes or on the Certificates relating to such Registered Notes. All
capitalised terms that are not defined in the Conditions will have the meanings given to them in the relevant
Pricing Supplement or the Trust Deed. Those definitions will be endorsed on the definitive Notes or Certificates,
as the case may be. References in the Conditions to “Notes” are to the Notes of one Series only, not to all Notes
that may be issued under the Programme.
The Notes are issued by Haitong International Finance Holdings Limited (the “Issuer”) and guaranteed by
Haitong Securities Co., Ltd. ( ) (the “Guarantor”), and are constituted by a trust deed
dated 26 April 2023 (as amended, varied, restated, novated, supplemented or replaced as at the date of issue of
the Notes (the “Issue Date”), the “Trust Deed”) between the Issuer, the Guarantor and Citicorp International
Limited (the “Trustee”, which expression shall, where the context so permits, include its successor(s) and all
persons for the time being the trustee or trustees under the Trust Deed) as trustee for the Noteholders (as defined
below). These terms and conditions (these “Conditions”) include summaries of, and are subject to, the detailed
provisions of the Trust Deed, which includes the forms of the Bearer Notes, Certificates, Receipts, Coupons and
Talons referred to below. An agency agreement dated 26 April 2023 (as amended, varied, restated, novated,
supplemented or replaced as at the Issue Date, the “Agency Agreement”) has been entered into in relation to the
Notes between the Issuer, the Guarantor, the Trustee, Citibank, N.A., London Branch as issuing and paying agent,
Citicorp International Limited as the CMU lodging and paying agent for Notes to be held in the Central
Moneymarkets Unit Service operated by the Hong Kong Monetary Authority (the “CMU”) and the other agents
named therein. The issuing and paying agent, the CMU lodging and paying agent, the other paying agents, the
registrar(s), the transfer agent(s) and the calculation agent(s) for the time being (if any) are referred to below
respectively as the “Issuing and Paying Agent” (which expression includes any successor Issuing and Paying
Agent appointed from time to time in connection with the Notes), the “CMU Lodging and Paying Agent”
(which expression includes any successor CMU Lodging and Paying Agent appointed from time to time in
connection with the Notes), the “Paying Agents” (which expression shall include the Issuing and Paying Agent
and the CMU Lodging and Paying Agent and any successor or additional Paying Agents appointed from time to
time in connection with the Notes), the “Registrar” (which expression includes any successor Registrar
appointed from time to time in connection with the Notes), the “Transfer Agents” (which expression includes
any successor or additional Transfer Agents appointed from time to time in connection with the Notes, and shall
include the Registrar) and the “Calculation Agent(s)” (which expression includes any successor Calculation
Agent(s) appointed from time to time in connection with the Notes) and collectively, the “Agents”. For the
purposes of these Conditions, all references to the Issuing and Paying Agent shall, with respect to a Series of
Notes to be held in the CMU, be deemed to be a reference to the CMU Lodging and Paying Agent and all such
references shall be construed accordingly. Each Tranche (as defined below) of Notes will have the benefit of a
deed of guarantee dated on or about the Issue Date (as amended, varied, restated, novated, supplemented or
replaced from time to time, each a “Deed of Guarantee”) entered into between the Guarantor and the Trustee.
Copies of the Trust Deed, the relevant Deed of Guarantee and the Agency Agreement are available for inspection
at all reasonable times during usual business hours (being between 9:00 a.m. and 3:00 p.m., Hong Kong time,
Monday to Friday other than public holidays) upon prior written request and proof of holding and identity to the
satisfaction of the Trustee, or as the case may be, the Issuing and Paying Agent at the principal office of the
Trustee (presently at 20th Floor, Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong)
and at the specified office of the Issuing and Paying Agent.
The Noteholders, the holders of the interest coupons (the “Coupons”) relating to interest bearing Notes in bearer
form and, where applicable in the case of such Notes, talons for further Coupons (the “Talons”) (the
“Couponholders”) and the holders of the receipts for the payment of instalments of principal (the “Receipts”)
relating to Notes in bearer form of which the principal is payable in instalments (the “Receiptholders”) are
entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed
and the relevant Deed of Guarantee and are deemed to have notice of those provisions applicable to them of the
Agency Agreement. The statements in these Conditions include summaries of, and are subject to, the detailed
provisions of the Trust Deed, the relevant Deed of Guarantee and the Agency Agreement.
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As used in these Conditions, “Tranche” means Notes which are identical in all respects, and “Series” means a
Tranche of Notes together with any further Tranche or Tranches of Notes which are (a) expressed to be
consolidated and form a single series with such Tranche of Notes and (b) identical in all respects (or in all
respects except for the Issue Date, the first payment of interest on them and the timing for submission of the
NDRC Post-issue Filing and other NDRC Filings (if applicable) and for complying with the Registration
Condition and for the completion of the Cross-Border Security Registration and the giving of consequential
notices thereof).
All capitalised terms that are not defined in these Conditions will have the meanings given to them in the relevant
Pricing Supplement or the Trust Deed.
1 FORM, DENOMINATION AND TITLE
The Notes are issued in bearer form (“Bearer Notes”) or in registered form (“Registered Notes”) in each case
in the Specified Denomination(s) shown hereon.
This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Instalment Note, a Dual Currency
Note or a Partly Paid Note, a combination of any of the foregoing or any other kind of Note, depending upon
the Interest Basis and Redemption/Payment Basis shown hereon.
Bearer Notes are serially numbered and are issued with Coupons (and, where appropriate, a Talon) attached, save
in the case of Zero Coupon Notes in which case references to interest (other than in relation to interest due after
the Maturity Date), Coupons and Talons in these Conditions are not applicable. Instalment Notes are issued with
one or more Receipts attached.
Registered Notes are represented by registered certificates (“Certificates”) and, save as provided in Condition
2(c), each Certificate shall represent the entire holding of Registered Notes by the same holder.
Each Tranche of Bearer Notes will be in bearer form and will be initially issued in the form of a temporary
Global Note or, if so specified in the relevant Pricing Supplement, a permanent Global Note which, in either case,
will be delivered on or prior to the original issue date of the Tranche to either (i) a common depositary (the
“Common Depositary”) for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking SA
(“Clearstream”); or (ii) a sub-custodian for the CMU. Each Tranche of Registered Notes will be in registered
form and will be initially issued in the form of a Global Certificate which will be delivered on or prior to the
original issue date of the Tranche to (i) the Common Depositary; or (ii) a sub-custodian for the CMU. The
Conditions are modified by certain provisions contained in the relevant Global Note or the Global Certificate
(as the case may be).
Title to the Bearer Notes and the Receipts, Coupons and Talons shall pass by delivery. Title to the Registered
Notes shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar in
accordance with the provisions of the Agency Agreement (the “Register”). Except as ordered by a court of
competent jurisdiction or as required by law, the holder (as defined below) of any Note, Receipt, Coupon or Talon
shall be deemed to be and may be treated as its absolute owner for all purposes whether or not it is overdue and
regardless of any notice of ownership, trust or an interest in it, any writing on it (or on the Certificate
representing it (other than the endorsed form of transfer)) or its theft or loss (or that of the relevant Certificate)
and no person shall be liable for so treating the holder.
For so long as any of the Notes are represented by a Global Note or a Global Certificate held on behalf of
Euroclear and/or Clearstream or a sub-custodian for the CMU, each person (other than Euroclear or
Clearstream or the CMU) who is for the time being shown in the records of Euroclear or Clearstream or the CMU
as the holder of a particular principal amount of such Notes (in which regard any certificate or other document
issued by Euroclear or Clearstream or the CMU as to the principal amount of such Notes standing to the account
of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated
by the Issuer, the Guarantor, the Trustee and the Agents as the holder of such principal amount of such Notes
for all purposes other than with respect to the payment of principal or interest on such principal amount of such
Notes, for which purpose the bearer of the relevant Global Note or the registered holder of the relevant Global
Certificate shall be treated by the Issuer, the Guarantor, the Trustee and any Agent as the holder of such principal
amount of such Notes in accordance with, and subject to, the terms of the relevant Global Note or Global
51
Certificate. Notwithstanding the above, if a Note (whether in global or definitive form) is held through the CMU,
any payment that is made in respect of such Note shall be made to the person for whose account(s) interests in
such Note are credited as being held with the CMU in accordance with the CMU Rules (as defined in the Agency
Agreement) at the relevant time and payment made in accordance thereof shall discharge the Issuer’s obligations
in respect of that payment. In addition, the Conditions are modified by certain provisions contained in the
relevant Global Note or the Global Certificate (as the case may be).
In these Conditions, “Noteholder” means the bearer of any Bearer Note and the Receipts relating to it or the
person in whose name a Registered Note is registered (as the case may be), “holder” (in relation to a Note,
Receipt, Coupon or Talon) means the bearer of any Bearer Note, Receipt, Coupon or Talon or the person in whose
name a Registered Note is registered (as the case may be) and capitalised terms have the meanings given to them
in these Conditions, the absence of any such meaning indicating that such term is not applicable to the Notes.
2 NO EXCHANGE OF NOTES, TRANSFERS OF REGISTERED NOTES AND CERTIFICATES
(a) No Exchange of Notes: Registered Notes may not be exchanged for Bearer Notes. Bearer Notes of one
Specified Denomination may not be exchanged for Bearer Notes of another Specified Denomination. Bearer
Notes may not be exchanged for Registered Notes.
(b) Transfer of Registered Notes: One or more Registered Notes may, subject to Conditions 2(f) and 2(g) and
the terms of the Agency Agreement, be transferred in whole or in part upon the surrender (at the specified
office of the Registrar or any Transfer Agent) of the Certificate(s) representing such Registered Notes to be
transferred, together with the form of transfer endorsed on such Certificate(s) (or another form of transfer
substantially in the same form and containing the same representations and certifications (if any), unless
otherwise agreed by the Issuer), duly completed and executed and any other evidence as the Registrar or such
Transfer Agent may require. In the case of a transfer of part only of a holding of Registered Notes represented
by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred (which
shall be in a Specified Denomination) and a further new Certificate in respect of the balance of the holding
not transferred (which shall be in a Specified Denomination) shall be issued to the transferor. No transfer of
title to a Registered Note will be valid unless and until entered on the Register.
(c) Exercise of Options or Partial Redemption in Respect of Registered Notes: In the case of an exercise of
an Issuer’s or Noteholders’ option in respect of, or a partial redemption of, a holding of Registered Notes
represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of
such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an
option resulting in Registered Notes of the same holding having different terms, separate Certificates shall
be issued in respect of those Registered Notes of that holding that have the same terms. New Certificates
shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent. In
the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new
Certificate representing the enlarged holding shall only be issued against surrender of the Certificate
representing the existing holding.
(d) Delivery of New Certificates: Each new Certificate to be issued pursuant to Conditions 2(b) or 2(c) shall
be made available for delivery within seven business days of receipt by the Registrar or, as the case may be,
any Transfer Agent, of a duly completed form of transfer or Put Exercise Notice (as defined in Condition
6(d)) or Exercise Notice (as defined in Condition 6(f)) and surrender of the existing Certificate(s). Delivery
of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as
the case may be) to whom delivery or surrender of such form of transfer, Put Exercise Notice, Exercise
Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender
as aforesaid and as specified in the relevant form of transfer, Put Exercise Notice, Exercise Notice or
otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate (but
free of charge to the holder and at the expense of the Issuer, failing whom the Guarantor) to such address
as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer
Agent or the Registrar (as the case may be) the costs of such other method of delivery and/or such insurance
as it may specify. In Conditions 2(d) and 2(f), “business day” means a day, other than a Saturday, Sunday
or public holiday, on which banks are generally open for business in the place of the specified office of the
relevant Transfer Agent or the Registrar (as the case may be).
52
(e) Transfers Free of Charge: Transfers of Registered Notes and Certificates on registration, transfer, exercise
of an option or partial redemption shall be effected without charge to the relevant holder by or on behalf of
the Issuer, the Registrar or any Transfer Agent, but upon (i) payment by the relevant Noteholder of any and
all tax or other governmental charges that may be imposed in relation to any of them (or the giving of such
indemnity and/or security and/or pre-funding as the Registrar or the relevant Transfer Agent may require);
(ii) the Registrar or the relevant Transfer Agent (as the case may be) being satisfied in its absolute discretion
with the documents of title and identity of the person making the application; and (iii) the Registrar or the
relevant Transfer Agent being satisfied that the regulations concerning transfer and registration of Notes have
been complied with.
(f) Closed Periods: No Noteholder may require the transfer of a Registered Note to be registered (i) during the
period of seven business days ending on (and including) the due date for redemption of, or payment of any
Instalment Amount in respect of, that Note, (ii) during the period of seven business days ending on (and
including) any date on which Notes may be called for redemption by the Issuer at its option pursuant to
Condition 6(c) or Condition 6(e), (iii) after any such Note has been put for redemption pursuant to Condition
6(d) or Condition 6(f), or (iv) during the period of seven business days ending on (and including) any Record
Date (as defined in Condition 7(c)).
(g) Regulations: All transfers of Notes and entries on the Register will be made subject to the detailed
regulations concerning transfer and registration of Notes scheduled to the Agency Agreement. The
regulations may be changed by the Issuer with the prior written approval of the Registrar and the Trustee or
by the Registrar with the prior written approval of the Trustee. A copy of the current regulations will be made
available for inspection by the Registrar at all reasonable times during usual business hours (being between
9:00 a.m. and 3:00 p.m., Hong Kong time, Monday to Friday other than public holidays) at its specified
office upon prior written request and proof of holding and identity to the satisfaction of the Registrar.
3 GUARANTEE AND STATUS
(a) Guarantee: The Guarantor will, in respect of each Tranche of Notes pursuant to the relevant Deed of
Guarantee, unconditionally and irrevocably guarantee the due and punctual payment of the principal of and
interest on, and all other amounts expressed to be payable by the Issuer under the Trust Deed, the Notes and,
if applicable, the Receipts and the Coupons (the “Guarantee”) when and as the same shall become due and
payable, whether on the stated maturity, upon acceleration, by call for redemption or otherwise.
The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by
mandatory provisions of applicable laws and regulation, at all times rank at least equally with all its other
present and future unsecured and unsubordinated obligations.
(b) Status: The Notes and any Receipts and Coupons relating to them constitute direct, unsubordinated,
unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu and without any
preference or priority among themselves. The payment obligations of the Issuer under the Notes and the
Receipts and the Coupons relating to them shall, save for such exceptions as may be provided by mandatory
provisions of applicable laws and regulation, at all times rank at least equally with all its other present and
future unsecured and unsubordinated obligations.
4 COVENANTS
(a) Undertakings relating to the Guarantee/NDRC Administrative Measures:
(i) For the benefit of each Tranche of the Notes to be issued in accordance with these Conditions and the
Trust Deed, the Guarantor shall execute a Deed of Guarantee in connection with such Tranche
substantially in the form attached to the Trust Deed on the Issue Date.
(ii) In relation to each Tranche of Notes where the NDRC Administrative Measures are applicable,
(A) the Guarantor undertakes to file or cause to be filed with the NDRC the requisite information and
documents in respect of the Notes, within the relevant prescribed timeframes after the Issue Date
in accordance with the Administrative Measures for the Review and Registration of Medium- and
Long-Term Foreign Debt of Enterprises ( (
56 )) issued by the NDRC and effective from 10 February 2023 (the “NDRC
Administrative Measures”), and any implementation rules, reports, certificates, approvals or
guidelines as issued by the NDRC from time to time (the “NDRC Filings”), including but not
limited to, the NDRC Post-issue Filing;
53
(B) the Guarantor undertakes to, within the prescribed timeframe after the execution of the Deed of
Guarantee, file or cause to be filed with SAFE, the relevant Deed of Guarantee in accordance with
the Provisions on the Foreign Exchange Administration of Cross-Border Guarantees (
) issued by SAFE on 12 May 2014 which came into effect on 1 June 2014 (the
“Cross-Border Security Registration”). The Guarantor shall use its best endeavours to complete
the Cross-Border Security Registration and obtain a registration certificate from SAFE (or any
other document evidencing the completion of registration issued by SAFE) on or before the
Registration Deadline and shall comply with all applicable PRC laws and regulations in relation
to the issue of the Notes and the Guarantee; and
(C) the Guarantor shall, on or before the Registration Deadline and within ten PRC Business Days
after, whichever is later, (i) the receipt of the registration certificate from SAFE (or any other
document evidencing the completion of registration issued by SAFE) and (ii) the submission of
the NDRC Post-issue Filing, provide the Trustee with (x) a certificate in English substantially in
the form set out in the Trust Deed signed by an Authorised Signatory of the Guarantor confirming
(1) the completion of the Cross-Border Security Registration and the submission of the NDRC
Post-issue Filing and (2) that no Change of Control, Event of Default or Potential Event of
Default has occurred; and (y) copies of the relevant documents evidencing the Cross-Border
Security Registration and the NDRC Post-issue Filing, each certified in English by an Authorised
Signatory of the Guarantor as being a true and complete copy of the original (the certificate and
documents specified in (x) and (y) in this Condition 4(a)(ii)(C) together, the “Registration
Documents”). In addition, the Guarantor shall procure that, within ten PRC Business Days after
the Registration Documents are delivered to the Trustee, the Issuer shall give notice to the
Noteholders (in accordance with Condition 16) confirming the completion of the Cross-Border
Security Registration and the submission of the NDRC Post-issue Filing.
(iii) In relation to each Tranche of Notes where the NDRC Administrative Measures are not applicable,
(A) the Guarantor undertakes to, within the prescribed timeframe after the execution of the Deed of
Guarantee, file or cause to be filed with SAFE the Cross-Border Security Registration. The
Guarantor shall use its best endeavours to complete the Cross-Border Security Registration and
obtain a registration certificate from SAFE (or any other document evidencing the completion of
registration issued by SAFE) on or before the Registration Deadline and shall comply with all
applicable PRC laws and regulations in relation to the issue of the Notes and the Guarantee; and
(B) the Guarantor shall, on or before the Registration Deadline and within ten PRC Business Days
after the receipt of the registration certificate from SAFE (or any other document evidencing the
completion of registration issued by SAFE), provide the Trustee with (x) a certificate in English
substantially in the form set out in the Trust Deed signed by an Authorised Signatory of the
Guarantor confirming (1) the completion of the Cross-Border Security Registration; and (2) that
no Change of Control, Event of Default or Potential Event of Default has occurred; and (y) copies
of the relevant documents evidencing the Cross-Border Security Registration, each certified in
English by an Authorised Signatory of the Guarantor as being a true and complete copy of the
original (the certificate and documents referred to in (x) and (y) in this Condition 4(a)(iii)(B)
together, the “SAFE Registration Documents”). In addition, the Guarantor shall procure that,
within ten PRC Business Days after the SAFE Registration Documents are delivered to the
Trustee, the Issuer shall give notice to the Noteholders (in accordance with Condition 16)
confirming the completion of the Cross-Border Security Registration.
(iv) The Trustee may rely conclusively on the Registration Documents and the SAFE Registration
Documents and shall have no obligation or duty to monitor or to assist with the Cross-Border Security
Registration or the NDRC Post-issue Filing or to ensure that the Cross-Border Security Registration or
the NDRC Post-issue Filing is made or submitted on or before the deadlines referred to in Condition
4(a) or on or before the Registration Deadline or to verify the accuracy, completeness, validity and/or
genuineness of any documents in relation to or in connection with the Cross-Border Security
Registration, the NDRC Post-issue Filing, the Registration Documents and/or the SAFE Registration
Documents or to procure that any Registration Document or SAFE Registration Document or any other
certificate, confirmation or other document which is not in English is translated into English or to
54
verify the accuracy of any English translation of any Registration Document or any SAFE Registration
Document or any other certificate, confirmation or other document or to give notice to the Noteholders
confirming the completion of the Cross-Border Security Registration and/or the NDRC Post-issue
Filing, and the Trustee shall not be liable to the Issuer, the Guarantor, the Noteholders or any other
person for not doing so.
(b) Financial Information: So long as any Note remains outstanding (as defined in the Trust Deed), the
Guarantor will, at the time of their issue, and, in the case of annual audited financial statements in any event
within 180 days of the end of each financial year, furnish the Trustee with three copies in English of every
balance sheet, profit and loss account, report or other notice, statement or circular issued to the members or
creditors (or any class of them) of the Guarantor generally in their capacity as such.
In these Conditions:
“Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China;
“Macau” means the Macau Special Administrative Region of the People’s Republic of China;
“NDRC” means the National Development and Reform Commission of the PRC or its local counterparts;
“NDRC Post-issue Filing” means the filing with the NDRC of the requisite information and documents in
respect of the issue of the Notes within ten PRC Business Days after the Issue Date;
“PRC” means the People’s Republic of China, which shall for the purposes of these Conditions, exclude
Hong Kong, Macau and Taiwan;
“PRC Business Day” means a day (other than a Saturday, Sunday or public holiday) on which commercial
banks are generally open for business in Beijing;
“Registration Deadline” means the day falling 270 PRC Business Days after the relevant Issue Date;
“SAFE” means the State Administration of Foreign Exchange of the PRC or its relevant local counterparts;
and
“Subsidiary” means any entity whose financial statements at any time are required by law or in accordance
with generally accepted accounting principles to be fully consolidated with those of the Issuer or the
Guarantor.
5 INTEREST AND OTHER CALCULATIONS
(a) Interest on Fixed Rate Notes: Each Fixed Rate Note bears interest on its outstanding principal amount from
and including the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to
the Rate of Interest, such interest being payable in arrear on each Interest Payment Date shown hereon. The
amount of interest payable shall be determined in accordance with Condition 5(h).
(b) Interest on Floating Rate Notes:
(i) Interest Payment Dates: Each Floating Rate Note bears interest on its outstanding principal amount
from and including the Interest Commencement Date at the rate per annum (expressed as a percentage)
equal to the Rate of Interest, such interest being payable in arrear on each Interest Payment Date. The
amount of interest payable shall be determined in accordance with Condition 5(h). Such Interest
Payment Date(s) is/are either shown hereon as Specified Interest Payment Dates or, if no Specified
Interest Payment Date(s) is/are shown hereon, “Interest Payment Date” shall mean each date which
falls the number of months or other period shown hereon as the Interest Period after the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest
Commencement Date.
55
(ii) Business Day Convention: If any date referred to in these Conditions that is specified to be subject
to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not
a Business Day, then, if the Business Day Convention specified is (A) the Floating Rate Business Day
Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby
fall into the next calendar month, in which event (x) such date shall be brought forward to the
immediately preceding Business Day and (y) each subsequent such date shall be the last Business Day
of the month in which such date would have fallen had it not been subject to adjustment, (B) the
Following Business Day Convention, such date shall be postponed to the next day that is a Business
Day, (C) the Modified Following Business Day Convention, such date shall be postponed to the next
day that is a Business Day unless it would thereby fall into the next calendar month, in which event
such date shall be brought forward to the immediately preceding Business Day or (D) the Preceding
Business Day Convention, such date shall be brought forward to the immediately preceding Business
Day.
(iii) Rate of Interest for Floating Rate Notes: The Rate of Interest in respect of Floating Rate Notes for
each Interest Accrual Period shall be determined in the manner specified hereon and the provisions
below relating to either ISDA Determination or Screen Rate Determination shall apply, depending upon
which is specified hereon.
(A) ISDA Determination for Floating Rate Notes
Where ISDA Determination is specified hereon as the manner in which the Rate of Interest is to
be determined, the Rate of Interest for each Interest Accrual Period shall be determined by the
Calculation Agent as a rate equal to the relevant ISDA Rate. For the purposes of this
sub-paragraph (A), “ISDA Rate” for an Interest Accrual Period means a rate equal to the Floating
Rate that would be determined by the Calculation Agent under a Swap Transaction under the
terms of an agreement incorporating the ISDA Definitions and under which:
(x) the Floating Rate Option is as specified hereon;
(y) the Designated Maturity is a period specified hereon; and
(z) the relevant Reset Date is the first day of that Interest Accrual Period unless otherwise
specified hereon.
If “2021 ISDA Definitions” is specified hereon as the applicable ISDA Definitions:
(1) Administrator/Benchmark Event shall be disapplied;
(2) if the Temporary Non-Publication Fallback for any specified Floating Rate Option is
specified to be “Temporary Non-Publication Fallback Alternative Rate” in the Floating Rate
Matrix of the 2021 ISDA Definitions, the reference to “Calculation Agent Alternative Rate
Determination” in definition of “Temporary Non-Publication Fallback – Alternative Rate”
shall be replaced by “Temporary Non-Publication Fallback – Previous Day’s Rate”; and
(3) “Fallback Observation Day” in the ISDA Definitions shall be deemed deleted in its entirety
and replaced with the following:
““Fallback Observation Day” means, in respect of a Reset Date and Calculation Period (or
any Compounding Period included in that Calculation Period) to which that Reset Date
relates, unless otherwise agreed, the day that is five Business Days preceding the related
Payment Date.”
For the purposes of this sub-paragraph (A), “Floating Rate”, “Calculation Agent”, “Floating
Rate Option”, “Designated Maturity”, “Reset Date” and “Swap Transaction” have the
meanings given to those terms in the ISDA Definitions.
56
(B) Screen Rate Determination for Floating Rate Notes not referencing SOFR Benchmark
(x) Where Screen Rate Determination is specified hereon as the manner in which the Rate of
Interest is to be determined (other than in respect of Notes for which the Reference Rate is
SOFR Benchmark), the Rate of Interest for each Interest Accrual Period will, subject as
provided below, be either:
(1) the offered quotation; or
(2) the arithmetic mean of the offered quotations,
(expressed as a percentage rate per annum) for the Reference Rate which appears or appear,
as the case may be, on the Relevant Screen Page as at 11.00 a.m. (Brussels time in the case
of EURIBOR or Hong Kong time in the case of HIBOR) or 11.15 a.m. (Hong Kong time
in the case of CNH HIBOR) or if, at or around that time it is notified that the fixing will
be published at 2.30 p.m. (Hong Kong time), then as of 2.30 p.m. (Hong Kong time in the
case of CNH HIBOR) on the Interest Determination Date in question as determined by the
Calculation Agent. If five or more of such offered quotations are available on the Relevant
Screen Page, the highest (or, if there is more than one such highest quotation, one only of
such quotations) and the lowest (or, if there is more than one such lowest quotation, one
only of such quotations) shall be disregarded by the Calculation Agent for the purpose of
determining the arithmetic mean of such offered quotations.
(y) if the Relevant Screen Page is not available or if sub-paragraph (x)(1) above applies and no
such offered quotation appears on the Relevant Screen Page or if sub-paragraph (x)(2) above
applies and fewer than three such offered quotations appear on the Relevant Screen Page in
each case as at the time specified above, subject as provided below, the Calculation Agent
shall request, if the Reference Rate is EURIBOR, the principal Euro-zone office of each of
the Reference Banks or, if the Reference Rate is HIBOR or CNH HIBOR, the principal
Hong Kong office of each of the Reference Banks, to provide the Calculation Agent with
its offered quotation (expressed as a percentage rate per annum) for the Reference Rate if
the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) or, if the
Reference Rate is HIBOR, at approximately 11.00 a.m. (Hong Kong time) or, in the case of
CNH HIBOR, at approximately 11.15 a.m. (Hong Kong time) on the Interest Determination
Date in question. If two or more of the Reference Banks provide the Calculation Agent with
such offered quotations, the Rate of Interest for such Interest Accrual Period shall be the
arithmetic mean of such offered quotations as determined by the Calculation Agent; and
(z) if paragraph (y) above applies and the Calculation Agent determines that fewer than two
Reference Banks are providing offered quotations, subject as provided below, the Rate of
Interest for such Interest Accrual Period shall be the arithmetic mean of the rates per annum
(expressed as a percentage) as communicated to (and at the request of) the Calculation
Agent by the Reference Banks or any two or more of them, at which such banks were
offered, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) or,
if the Reference Rate is HIBOR, at approximately 11.00 a.m. (Hong Kong time) or, in the
case of CNH HIBOR, at approximately 11.15 a.m. (Hong Kong time) on the relevant
Interest Determination Date, deposits in the Specified Currency for a period equal to that
which would have been used for the Reference Rate by leading banks in, if the Reference
Rate is EURIBOR, the Euro-zone inter-bank market, or, if the Reference Rate is HIBOR or
CNH HIBOR, the Hong Kong inter-bank market, as the case may be, or, if fewer than two
of the Reference Banks provide the Calculation Agent with such offered rates, the offered
rate for deposits in the Specified Currency for a period equal to that which would have been
used for the Reference Rate, or the arithmetic mean of the offered rates for deposits in the
Specified Currency for a period equal to that which would have been used for the Reference
Rate, at which, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels
time), or, if the Reference Rate is HIBOR, at approximately 11.00 a.m. (Hong Kong time)
or, in the case of CNH HIBOR, at approximately 11.15 a.m. (Hong Kong time) on the
relevant Interest Determination Date, any one or more banks (which bank or banks is or are
in the opinion of the Issuer suitable for such purpose) informs the Calculation Agent it is
quoting to leading banks in, if the Reference Rate is EURIBOR, the Euro-zone inter-bank
market, or, if the Reference Rate is HIBOR or CNH HIBOR, the Hong Kong inter-bank
market, as the case may be, provided that, if the Rate of Interest cannot be determined in
accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be
57
determined as at the last preceding Interest Determination Date (though substituting, where
a different Margin or Maximum Rate of Interest or Minimum Rate of Interest is to be
applied to the relevant Interest Accrual Period from that which applied to the last preceding
Interest Accrual Period, the Margin or Maximum Rate of Interest or Minimum Rate of
Interest relating to the relevant Interest Accrual Period, in place of the Margin or Maximum
Rate of Interest or Minimum Rate of Interest relating to that last preceding Interest Accrual
Period).
If the Reference Rate from time to time in respect of Floating Rate Notes is specified hereon as
being other than EURIBOR, HIBOR, CNH HIBOR or SOFR Benchmark, the Rate of Interest in
respect of such Notes will be determined as provided hereon.
(C) Screen Rate Determination for Floating Rate Notes referencing SOFR Benchmark
Where Screen Rate Determination is specified hereon as the manner in which the Rate of Interest
is to be determined where the Reference Rate is SOFR Benchmark, the Rate of Interest for each
Interest Accrual Period will, subject as provided below, be equal to the relevant SOFR Benchmark
as determined by the Calculation Agent on the relevant Interest Determination Date.
The “SOFR Benchmark” will be determined based on Simple SOFR Average, Compounded
Daily SOFR or Compounded SOFR Index, as follows (subject in each case to Condition
5(b)(iii)(E) as further specified hereon):
(x) If Simple SOFR Average (“Simple SOFR Average”) is specified hereon as the manner in
which the SOFR Benchmark will be determined, the SOFR Benchmark for each Interest
Accrual Period shall be the arithmetic mean of the SOFR reference rates for each U.S.
Government Securities Business Day during such Interest Accrual Period, as calculated by
the Calculation Agent, and where, if applicable and as specified hereon, the SOFR reference
rate on the SOFR Rate Cut-Off Date shall be used for the U.S. Government Securities
Business Days in the relevant Interest Accrual Period from (and including) the SOFR Rate
Cut-Off Date to (but excluding) the last date of that Interest Accrual Period.
(y) If Compounded Daily SOFR (“Compounded Daily SOFR”) is specified hereon as the
manner in which the SOFR Benchmark will be determined, the SOFR Benchmark for each
Interest Accrual Period shall be equal to the compounded average of daily SOFR reference
rates for each day during the relevant Interest Accrual Period (where SOFR Lag, SOFR
Payment Delay or SOFR Lockout is specified as applicable hereon to determine
Compounded Daily SOFR) or the SOFR Observation Period (where SOFR Observation
Shift is specified as applicable hereon to determine Compounded Daily SOFR).
Compounded Daily SOFR shall be calculated by the Calculation Agent in accordance with
one of the formulas referenced below depending upon which is specified as applicable
hereon:
(i) SOFR Lag:
SOFR ×USBD × 360
1+ 1 ×
360
with the resulting percentage being rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with 0.000005 per cent. being rounded upwards (e.g.,
9.876541 per cent. (or 0.09876541) being rounded down to 9.87654 per cent. (or 0.0987654)
and 9.876545 per cent. (or 0.09876545) being rounded up to 9.87655 per cent. (or
0.0987655)) and where:
“SOFRi-xUSBD” for any U.S. Government Securities Business Day(i) in the relevant Interest
Accrual Period, is equal to the SOFR reference rate for the U.S. Government Securities
Business Day falling the number of Lookback Days prior to that U.S. Government
Securities Business Day(i);
58
“Lookback Days” means such number of U.S. Government Securities Business Days as
specified hereon;
“d” means the number of calendar days in the relevant Interest Accrual Period;
“d 0” for any Interest Accrual Period, means the number of U.S. Government Securities
Business Days in the relevant Interest Accrual Period;
“i” means a series of whole numbers ascending from one to d0, representing each relevant
U.S. Government Securities Business Day in chronological order from (and including) the
first U.S. Government Securities Business Day in the relevant Interest Accrual Period (each
a “U.S. Government Securities Business Day(i)”); and
“n i”, for any U.S. Government Securities Business Day(i) in the relevant Interest Accrual
Period, means the number of calendar days from (and including) such U.S. Government
Securities Business Day(i) up to (but excluding) the following U.S. Government Securities
Business Day.
(ii) SOFR Observation Shift:
SOFR × 360
1+ 1 ×
360
with the resulting percentage being rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with 0.000005 per cent. being rounded upwards (e.g.,
9.876541 per cent. (or 0.09876541) being rounded down to 9.87654 per cent. (or 0.0987654)
and 9.876545 per cent. (or 0.09876545) being rounded up to 9.87655 per cent. (or
0.0987655)) and where:
“SOFRi” for any U.S. Government Securities Business Day(i) in the relevant SOFR
Observation Period, is equal to the SOFR reference rate for that U.S. Government Securities
Business Day(i);
“SOFR Observation Period” means, in respect of each Interest Accrual Period, the period
from (and including) the date falling the number of SOFR Observation Shift Days prior to
the first day of the relevant Interest Accrual Period to (but excluding) the date falling the
number of SOFR Observation Shift Days prior to the Interest Period Date for such Interest
Accrual Period;
“SOFR Observation Shift Days” means the number of U.S. Government Securities
Business Days as specified hereon;
“d” means the number of calendar days in the relevant SOFR Observation Period;
“d 0” for any SOFR Observation Period, means the number of U.S. Government Securities
Business Days in the relevant SOFR Observation Period;
“i” means a series of whole numbers ascending from one to d0, representing each U.S.
Government Securities Business Day in chronological order from (and including) the first
U.S. Government Securities Business Day in the relevant SOFR Observation Period (each
a “U.S. Government Securities Business Day(i)”); and
“n i”, for any U.S. Government Securities Business Day(i) in the relevant SOFR Observation
Period, means the number of calendar days from (and including) such U.S. Government
Securities Business Day(i) up to (but excluding) the following U.S. Government Securities
Business Day.
59
(iii) SOFR Payment Delay:
SOFR × 360
1+ 1 ×
360
with the resulting percentage being rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with 0.000005 per cent. being rounded upwards (e.g.,
9.876541 per cent. (or 0.09876541) being rounded down to 9.87654 per cent. (or 0.0987654)
and 9.876545 per cent. (or 0.09876545) being rounded up to 9.87655 per cent. (or
0.0987655)) and where:
“SOFRi” for any U.S. Government Securities Business Day(i) in the relevant Interest
Accrual Period, is equal to the SOFR reference rate for that U.S. Government Securities
Business Day(i);
“Interest Payment Date” shall be the number of Interest Payment Delay Days following
each Interest Period Date; provided that the Interest Payment Date with respect to the final
Interest Accrual Period will be the Maturity Date or the relevant date for redemption, as
applicable;
“Interest Payment Delay Days” means the number of Business Days as specified hereon;
“d” means the number of calendar days in the relevant Interest Accrual Period;
“d 0” for any Interest Accrual Period, means the number of U.S. Government Securities
Business Days in the relevant Interest Accrual Period;
“i” means a series of whole numbers ascending from one to d0, representing each relevant
U.S. Government Securities Business Day in chronological order from (and including) the
first U.S. Government Securities Business Day in the relevant Interest Accrual Period (each
a “U.S. Government Securities Business Day(i)”); and
“n i”, for any U.S. Government Securities Business Day(i) in the relevant Interest Accrual
Period, means the number of calendar days from (and including) such U.S. Government
Securities Business Day(i) up to (but excluding) the following U.S. Government Securities
Business Day.
For the purposes of calculating Compounded Daily SOFR with respect to the final Interest
Accrual Period where SOFR Payment Delay is specified hereon, the SOFR reference rate
for each U.S. Government Securities Business Day in the period from (and including) the
SOFR Rate Cut-Off Date to (but excluding) the Maturity Date or the relevant date for
redemption, as applicable, shall be the SOFR reference rate in respect of such SOFR Rate
Cut-Off Date.
(iv) SOFR Lockout:
SOFR × 360
1+ 1 ×
360
with the resulting percentage being rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with 0.000005 per cent. being rounded upwards (e.g.,
9.876541 per cent. (or 0.09876541) being rounded down to 9.87654 per cent. (or 0.0987654)
and 9.876545 per cent. (or 0.09876545) being rounded up to 9.87655 per cent. (or
0.0987655)) and where:
60
“SOFRi” for any U.S. Government Securities Business Day(i) in the relevant Interest
Accrual Period, is equal to the SOFR reference rate for that U.S. Government Securities
Business Day(i), except that the SOFR for any U.S. Government Securities Business Day(i)
in respect of the period from (and including) the SOFR Rate Cut-Off Date to (but excluding)
the Interest Period Date for such Interest Accrual Period shall be the SOFR reference rate
in respect of such SOFR Rate Cut-Off Date;
“d” means the number of calendar days in the relevant Interest Accrual Period;
“d 0” for any Interest Accrual Period, means the number of U.S. Government Securities
Business Days in the relevant Interest Accrual Period;
“i” means a series of whole numbers ascending from one to d0, representing each relevant
U.S. Government Securities Business Day from (and including) the first U.S. Government
Securities Business Day in the relevant Interest Accrual Period (each a “U.S. Government
Securities Business Day(i)”); and
“n i”, for any U.S. Government Securities Business Day(i) in the relevant Interest Accrual
Period, means the number of calendar days from (and including) such U.S. Government
Securities Business Day(i) up to (but excluding) the following U.S. Government Securities
Business Day.
The following defined terms shall have the meanings set out below for purpose of Condition
5(b)(iii)(C)(x) and Condition 5(b)(iii)(C)(y):
“Bloomberg Screen SOFRRATE Page” means the Bloomberg screen designated “SOFRRATE”
or any successor page or service;
“Reuters Page USDSOFR=” means the Reuters page designated “USDSOFR=” or any successor
page or service;
“SOFR” means, in respect of a U.S. Government Securities Business Day, the reference rate
determined by the Calculation Agent in accordance with the following provision:
(i) the Secured Overnight Financing Rate published at the SOFR Determination Time as such
reference rate is reported on the Bloomberg Screen SOFRRATE Page; the Secured
Overnight Financing Rate published at the SOFR Determination Time as such reference rate
is reported on the Reuters Page USDSOFR=; or the Secured Overnight Financing Rate
published at the SOFR Determination Time on the SOFR Administrator’s Website;
(ii) if the reference rate specified in (i) above does not appear and a SOFR Benchmark
Transition Event and its related SOFR Benchmark Replacement Date have not occurred, the
SOFR reference rate shall be the reference rate published on the SOFR Administrator’s
Website for the first preceding U.S. Government Securities Business Day for which SOFR
was published on the SOFR Administrator’s Website; or
(iii) if the reference rate specified in (i) above does not appear and a SOFR Benchmark
Transition Event and its related SOFR Benchmark Replacement Date have occurred, the
provisions set forth in Condition 5(b)(iii)(E) shall apply as specified hereon; and
“SOFR Determination Time” means in respect of a U.S. Government Securities Business Day,
approximately 3:00 p.m. (New York City time) on the immediately following U.S. Government
Securities Business Day; and
“SOFR Rate Cut-Off Date” has the meaning as specified hereon.
61
(z) If Compounded SOFR Index (“Compounded SOFR Index”) is specified as applicable
hereon, the SOFR Benchmark for each Interest Accrual Period shall be equal to the
compounded average of daily SOFR reference rates for each day during the relevant SOFR
Observation Period as calculated by the Calculation Agent as follows:
SOFR Index End 360
1 ×
SOFR Index Start c
with the resulting percentage being rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with 0.000005 per cent. being rounded upwards (e.g.,
9.876541 per cent. (or 0.09876541) being rounded down to 9.87654 per cent. (or 0.0987654)
and 9.876545 per cent. (or 0.09876545) being rounded up to 9.87655 per cent. (or
0.0987655)) and where:
“SOFR Index”, in respect of a U.S. Government Securities Business Day, means:
(a) the SOFR Index value as published by the SOFR Administrator on the SOFR
Administrator’s Website on or about 3:00 p.m. (New York time) on such U.S.
Government Securities Business Day (the “SOFR Index Determination Time”);
provided that in the event that the value originally published by the SOFR
Administrator on or about 3:00 p.m. (New York time) on any U.S. Government
Securities Business Day is subsequently corrected and such corrected value is
published by the SOFR Administrator on the original date of publication, then such
corrected value, instead of the value that was originally published, shall be deemed the
SOFR Index value as of the SOFR Index Determination Time in relation to such U.S.
Government Securities Business Day; or
(b) if a SOFR Index value does not so appear as specified in (a) above of this definition,
then:
(1) if a Benchmark Transition Event and its related Benchmark Replacement Date
has not occurred with respect to SOFR, then Compounded SOFR Index shall be
the rate determined pursuant to the “SOFR Index Unavailable” provisions in
Condition 5(b)(iii)(C)(aa); or
(2) if a Benchmark Transition Event and its related Benchmark Replacement Date
has occurred with respect to SOFR, then Compounded SOFR Index shall be the
rate determined pursuant to Condition 5(b)(iii)(E);
“SOFR IndexEnd” means, in respect of an Interest Accrual Period, the SOFR Index value
on the date that is the number of U.S. Government Securities Business Days specified
hereon prior to the Interest Period Date for such Interest Accrual Period (or in the final
Interest Accrual Period, the Maturity Date);
“SOFR Index Start” means, in respect of an Interest Accrual Period, the SOFR Index value
on the date that is the number of U.S. Government Securities Business Days specified
hereon prior to the first day of such Interest Accrual Period;
“SOFR Observation Period” means, in respect of each Interest Accrual Period, the period
from (and including) the date falling the number of SOFR Observation Shift Days prior to
the first day of such Interest Accrual Period to (but excluding) the date falling the number
of SOFR Observation Shift Days prior to the Interest Period Date for such Interest Accrual
Period (or in the final Interest Accrual Period, the Maturity Date);
“SOFR Observation Shift Days” means the number of U.S. Government Securities
Business Days as specified hereon; and
“d c” means the number of calendar days in the applicable SOFR Observation Period.
62
The following defined terms shall have the meanings set out below for purpose of this Condition
5(b)(iii)(C):
“SOFR Administrator” means the Federal Reserve Bank of New York or any successor
administrator of the SOFR Index value and Secured Overnight Financing Rate;
“SOFR Administrator’s Website” means the website of the SOFR Administrator
(currently, being https://www.newyorkfed.org/markets/reference-rates/sofr-averages-and-index),
or any successor source;
“SOFR Benchmark Replacement Date” means the Benchmark Replacement Date with respect
to the then current SOFR Benchmark;
“SOFR Benchmark Transition Event” means the occurrence of a Benchmark Transition Event
with respect to the then current SOFR Benchmark; and
“U.S. Government Securities Business Day” or “USBD” means any day except for a Saturday,
a Sunday or a day on which the Securities Industry and Financial Markets Association
recommends that the fixed income departments of its members be closed for the entire day for
purposes of trading in U.S. government securities.
(aa) SOFR Index Unavailable
If a SOFR Index value is not published on the relevant Interest Determination Date and a
Benchmark Transition Event and its related Benchmark Replacement Date has not occurred with
respect to SOFR, then the SOFR Index shall be calculated in accordance with the Compounded
SOFR formula and the related definitions as set out below in Condition 5(b)(iii)(C)(aa):
“Compounded SOFR” means, for the applicable Interest Accrual Period for which the SOFR
Index is not available, the rate of return on a daily compounded interest investment during the
relevant Observation Period (with the daily SOFR reference rate as the reference rate for the
calculation of interest) and calculated by the Calculation Agent in accordance with the following
formula, and the resulting percentage will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, 0.000005 per cent. being rounded upwards (e.g.,
9.876541 per cent. (or 0.09876541) being rounded down to 9.87654 per cent. (or 0.0987654) and
9.876545 per cent. (or 0.09876545) being rounded up to 9.87655 per cent. (or 0.0987655)):
SOFR × 360
1+ 1 ×
360
“d” means the number of calendar days in the relevant Observation Period;
“d 0” means the number of U.S. Government Securities Business Days in the relevant Observation
Period.
“i” means a series of whole numbers from one to d0, each representing the relevant U.S.
Government Securities Business Days in chronological order from (and including) the number of
U.S. Government Securities Business Day as specified hereon in the relevant Observation Period
(each a “U.S. Government Securities Business Day(i)”);
“n i” for any U.S. Government Securities Business Day(i) in the relevant Observation Period,
means the number of calendar days from (and including) such U.S. Government Securities
Business Day(i) up to (but excluding) the following U.S. Government Securities Business Day(i);
“SOFRi” for any U.S. Government Securities Business Day(i) in the relevant Observation Period,
is equal to SOFR in respect of that U.S. Government Securities Business Day(i);
63
“Bloomberg Screen SOFRRATE Page” means the Bloomberg screen designated “SOFRRATE”
or any successor page or service;
“Observation Period” means, in respect of each Interest Accrual Period, the period from (and
including) the date falling a number of U.S. Government Securities Business Days equal to the
Observation Shift Days preceding the first date in such Interest Accrual Period to (but excluding)
the date falling a number of U.S. Government Securities Business Days equal to the number of
Observation Shift Days preceding the Interest Period Date for such Interest Accrual Period;
“Observation Shift Days” means the number of U.S. Government Securities Business Days as
specified hereon;
“Reuters Page USDSOFR=” means the Reuters page designated “USDSOFR=” or any successor
page or service;
“SOFR” means, in respect of any U.S. Government Securities Business Day:
(a) the Secured Overnight Financing Rate published at the SOFR Determination Time, as such
rate is reported on the Bloomberg Screen SOFRRATE Page; the Secured Overnight
Financing Rate published at the SOFR Determination Time, as such rate is reported on the
Reuters Page USDSOFR=; or the Secured Overnight Financing Rate published at the SOFR
Determination Time on the SOFR Administrator’s Website; or
(b) if the rate specified in (a) above does not appear, the SOFR published on the SOFR
Administrator’s Website for the first preceding U.S. Government Securities Business Day
for which SOFR was published on the SOFR Administrator’s Website;
“SOFR Administrator” means the Federal Reserve Bank of New York or any successor
administrator of the SOFR Index value and Secured Overnight Financing Rate;
“SOFR Administrator’s Website” means the website of the SOFR Administrator (currently
being, https://www.newyorkfed.org/markets/reference-rates/sofr-averages-and-index), or any
successor source;
“SOFR Determination Time” means on or about 3:00 p.m. (New York City time) on the SOFR
Administrator’s Website on the immediately following U.S. Government Securities Business Day;
and
“U.S. Government Securities Business Day” means any day except for a Saturday, a Sunday or
a day on which the Securities Industry and Financial Markets Association recommends that the
fixed income departments of its members be closed for the entire day for purposes of trading in
U.S. government securities.
(D) Benchmark Discontinuation (for Floating Rate Notes not referencing SOFR Benchmark)
(x) Independent Adviser
Other than in the case of a U.S. dollar-denominated Floating Rate Note for which the
Reference Rate is specified hereon as being “SOFR Benchmark”, if a Benchmark Event
occurs in relation to the Reference Rate when the Rate of Interest (or any component part
thereof) for any Interest Period remains to be determined by reference to such Original
Reference Rate, then the Issuer shall use its reasonable endeavours to appoint an
Independent Adviser, as soon as reasonably practicable, to advise the Issuer in determining
a Successor Rate, failing which an Alternative Rate (in accordance with this Condition
5(b)(iii)(D)) and, in either case, an Adjustment Spread, if any (in accordance with Condition
5(b)(iii)(D)(z)) and any Benchmark Amendments (in accordance with Condition
5(b)(iii)(D)(aa)).
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In the absence of bad faith or fraud, the Independent Adviser shall have no liability
whatsoever to the Issuer, the Guarantor, the Trustee, the Paying Agents, the Noteholders, the
Receiptholders or the Couponholders for any determination made by it, pursuant to this
Condition 5(b)(iii)(D) and the Agents will not be liable for any loss, liability, cost, charge
or expense which may arise as a result thereof.
If (1) the Issuer is unable to appoint an Independent Adviser; or (2) the Issuer fails to
determine a Successor Rate or, failing which, an Alternative Rate in accordance with this
Condition 5(b)(iii)(D)(x) prior to the relevant Interest Determination Date, the Reference
Rate applicable to the immediate following Interest Accrual Period shall be the Reference
Rate applicable as at the last preceding Interest Determination Date. If there has not been
a first Interest Payment Date, the Reference Rate shall be the Reference Rate applicable to
the first Interest Accrual Period. For the avoidance of doubt, any adjustment pursuant to this
Condition 5(b)(iii)(D)(x) shall apply to the immediately following Interest Accrual Period
only. Any subsequent Interest Period may be subject to the subsequent operation of and to
adjustment as provided on the first paragraph of this Condition 5(b)(iii)(D)(x).
(y) Successor Rate or Alternative Rate
If the Issuer, following consultation with the Independent Adviser, determines in its
discretion that:
(1) there is a Successor Rate, then such Successor Rate and the applicable Adjustment
Spread shall subsequently be used in place of the Original Reference Rate to determine
the Rate of Interest (or the relevant component part(s) thereof) for the relevant Interest
Accrual Period and all following Interest Accrual Periods (subject to the subsequent
operation of this Condition 5(b)(iii)(D)); or
(2) there is no Successor Rate but that there is an Alternative Rate, then such Alternative
Rate and the applicable Adjustment Spread shall subsequently be used in place of the
Original Reference Rate to determine the Rate of Interest (or the relevant component
part thereof) for the relevant Interest Accrual Period and all following Interest Accrual
Periods (subject to the subsequent operation of this Condition 5(b)(iii)(D)).
(z) Adjustment Spread
The Adjustment Spread (or the formula or methodology for determining the Adjustment
Spread) shall apply to the Successor Rate or the Alternative Rate (as the case may be). If
the Issuer, following consultation with the Independent Adviser, is unable to determine the
quantum of, or a formula or methodology for determining, such Adjustment Spread, then the
Successor Rate or Alternative Rate (as applicable) will apply without an Adjustment Spread.
(aa) Benchmark Amendments
If any relevant Successor Rate or Alternative Rate and, in either case, the applicable
Adjustment Spread is determined in accordance with this Condition 5(b)(iii)(D) and the
Issuer, following consultation with the Independent Adviser, determines in its discretion (1)
that amendments to these Conditions, the Trust Deed, the relevant Deed of Guarantee and/or
the Agency Agreement are necessary to ensure the proper operation of such Successor Rate
or Alternative Rate and/or (in either case) the applicable Adjustment Spread (such
amendments, the “Benchmark Amendments”) and (2) the terms of the Benchmark
Amendments, then the Issuer shall, following consultation with the Calculation Agent (or
the person specified hereon as the party responsible for calculating the Rate(s) of Interest
and the Interest Amount(s)), subject to giving notice thereof in accordance with Condition
5(b)(iii)(D)(bb), without any requirement for the consent or approval of relevant holders,
vary these Conditions, the Trust Deed, the relevant Deed of Guarantee and/or the Agency
Agreement to give effect to such Benchmark Amendments with effect from the date
specified in such notice (and for the avoidance of doubt, the Trustee shall, at the direction
and expense of the Issuer, consent to and effect such consequential amendments to these
Conditions, the Trust Deed, the relevant Deed of Guarantee and/or the Agency Agreement
65
as may be required in order to give effect to this Condition 5(b)(iii)(D)), provided that the
Trustee shall not be bound by or be obliged to give effect to such Benchmark Amendments,
if in the reasonable opinion of the Trustee (acting in good faith and following consultation,
to the extent practicable, with the Issuer), the same would not be operable in accordance
with the terms proposed pursuant to this Condition 5(b)(iii)(D) or would expose it to any
additional duties or liabilities or reduce or amend the rights and/or the protective provisions
afforded to it in these Conditions, the Trust Deed, the relevant Deed of Guarantee and/or the
Agency Agreement and/or any documents relating to the Notes to which it is a party in any
way.
(bb) Notices, etc.
Any Successor Rate and Alternative Rate and in either case, the applicable Adjustment
Spread and the specific terms of any Benchmark Amendments determined under this
Condition 5(b)(iii)(D) will be notified promptly by the Issuer to the Trustee, the Calculation
Agent, the Paying Agents and, in accordance with Condition 16, to Noteholders. Such notice
shall be irrevocable and shall specify the effective date of the Benchmark Amendments, if
any.
No later than notifying the Noteholders of the same, the Issuer shall deliver to the Trustee,
the Calculation Agent and the Paying Agents a certificate signed by an Authorised Signatory
of the Issuer:
(1) confirming (i) that a Benchmark Event has occurred, (ii) the relevant Successor Rate
or, as the case may be, the relevant Alternative Rate, (iii) the applicable Adjustment
Spread and (iv) the specific terms of any relevant Benchmark Amendments (if any),
in each case as determined in accordance with the provisions of this Condition
5(b)(iii)(D); and
(2) certifying that the Benchmark Amendments (if any) are necessary to ensure the proper
operation of such relevant Successor Rate or Alternative Rate and (in either case) the
applicable Adjustment Spread.
The Successor Rate or Alternative Rate and the applicable Adjustment Spread and the
Benchmark Amendments (if any) specified in such certificate will (in the absence of
manifest error or bad faith in the determination of such Successor Rate or Alternative Rate
and (in either case) the applicable Adjustment Spread and such Benchmark Amendments (if
any)) be binding on the Issuer, the Trustee, the Calculation Agent, the Paying Agents and
the Noteholders.
(cc) Survival of Original Reference Rate
Without prejudice to the obligations of the Issuer under Condition 5(b)(iii)(D)(x), Condition
5(b)(iii)(D)(y), Condition 5(b)(iii)(D)(z) and Condition 5(b)(iii)(D)(aa), the Original
Reference Rate and the fallback provisions provided for in Condition 5(b)(iii)(B) will
continue to apply unless and until a Benchmark Event has occurred.
(E) Benchmark Discontinuation (SOFR Benchmark)
This Condition 5(b)(iii)(E) shall only apply to U.S. dollar-denominated Notes for which the
Reference Rate is specified hereon as being “SOFR Benchmark”. The following provisions shall
apply if Benchmark Discontinuation (SOFR Benchmark) is specified as applicable hereon:
(x) Benchmark Replacement
If the Issuer or its designee determines on or prior to the relevant Reference Time that a
Benchmark Transition Event and its related Benchmark Replacement Date have occurred
with respect to the then current Benchmark, the Benchmark Replacement will replace the
then current Benchmark for all purposes relating to the Notes in respect of all
determinations on such date and for all determinations on all subsequent dates.
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(y) Benchmark Replacement Conforming Changes
In connection with the implementation of a Benchmark Replacement, the Issuer or its
designee will have the right to make Benchmark Replacement Conforming Changes from
time to time. For the avoidance of doubt, the Trustee and any of the Agents shall, at the
direction and expense of the Issuer, effect such consequential amendments to the Trust
Deed, the relevant Deed of Guarantee, the Agency Agreement and these Conditions as may
be required to give effect to this Condition 5(iii)(E). Noteholders’ consent shall not be
required in connection with effecting any such changes, including the execution of any
documents or any steps to be taken by the Trustee or any of the Agents (if required). Further,
none of the Trustee, the Calculation Agent, the Paying Agents, the Registrars or the Transfer
Agents shall be responsible or liable for any determinations, decisions or elections made by
the Issuer or its designee with respect to any Benchmark Replacement or any other changes
and shall be entitled to rely conclusively on any certifications provided to each of them in
this regard.
(z) Decisions and Determinations
Any determination, decision or election that may be made by the Issuer or its designee
pursuant to this Condition 5(iii)(E), including any determination with respect to a tenor, rate
or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and
any decision to take or refrain from taking any action or any selection (i) will be conclusive
and binding absent manifest error, (ii) will be made in the sole discretion of the Issuer or
its designee, as applicable, and (iii) notwithstanding anything to the contrary in the
documentation relating to the Notes, shall become effective without consent from the
holders or any other party.
(aa) The following defined terms shall have the meanings set out below for purpose of this
5(b)(iii)(E):
“Benchmark” means, initially, the relevant SOFR Benchmark specified hereon; provided
that if the Issuer or its designee determines on or prior to the Reference Time that a
Benchmark Transition Event and its related Benchmark Replacement Date have occurred
with respect to the relevant SOFR Benchmark (including any daily published component
used in the calculation thereof) or the then current Benchmark, then “Benchmark” means
the applicable Benchmark Replacement;
“Benchmark Transition Event” means the occurrence of one or more of the following
events with respect to the then current Benchmark (including any daily published
component used in the calculation thereof):
(i) a public statement or publication of information by or on behalf of the administrator
of the Benchmark (or such component) announcing that such administrator has ceased
or will cease to provide the Benchmark (or such component), permanently or
indefinitely, provided that, at the time of such statement or publication, there is no
successor administrator that will continue to provide the Benchmark (or such
component); or
(ii) a public statement or publication of information by the regulatory supervisor for the
administrator of the Benchmark (or such component), the central bank for the currency
of the Benchmark (or such component), an insolvency official with jurisdiction over
the administrator for the Benchmark (or such component), a resolution authority with
jurisdiction over the administrator for the Benchmark (or such component) or a court
or an entity with similar insolvency or resolution authority over the administrator for
the Benchmark, which states that the administrator of the Benchmark (or such
component) has ceased or will cease to provide the Benchmark (or such component)
permanently or indefinitely, provided that, at the time of such statement or publication,
there is no successor administrator that will continue to provide the Benchmark (or
such component); or
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(iii) a public statement or publication of information by the regulatory supervisor for the
administrator of the Benchmark announcing that the Benchmark is no longer
representative;
“Benchmark Replacement” means the first alternative set forth in the order below that can
be determined by the Issuer or its designee as of the Benchmark Replacement Date:
(i) the sum of:
(a) the alternate reference rate that has been selected or recommended by the
Relevant Governmental Body as the replacement for the then current Benchmark
(including any daily published component used in the calculation thereof); and
(b) the Benchmark Replacement Adjustment;
(ii) the sum of:
(a) the ISDA Fallback Rate; and
(b) the Benchmark Replacement Adjustment; or
(iii) the sum of:
(a) the alternate reference rate that has been selected by the Issuer or its designee as
the replacement for the then current Benchmark (including any daily published
component used in the calculation thereof) giving due consideration to any
industry-accepted reference rate as a replacement for the then current
Benchmark (including any daily published component used in the calculation
thereof) for U.S. dollar-denominated Floating Rate Notes at such time; and
(b) the Benchmark Replacement Adjustment;
“Benchmark Replacement Adjustment” means the first alternative set forth in the order
below that can be determined by the Issuer or its designee as of the Benchmark Replacement
Date:
(i) the spread adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero) that has been selected
or recommended by the Relevant Governmental Body for the applicable Unadjusted
Benchmark Replacement;
(ii) if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA
Fallback Rate, the ISDA Fallback Adjustment; or
(iii) the spread adjustment (which may be a positive or negative value or zero) that has
been selected by the Issuer or its designee giving due consideration to any
industry-accepted spread adjustment, or method for calculating or determining such
spread adjustment, for the replacement of the then current Benchmark (including any
daily published component used in the calculation thereof) with the applicable
Unadjusted Benchmark Replacement for U.S. dollar-denominated Floating Rate Notes
at such time;
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark
Replacement, any technical, administrative or operational changes (including changes to the
timing and frequency of determining rates and making payments of interest, rounding of
amounts or tenors, and other administrative matters) that the Issuer or its designee decides
may be appropriate to reflect the adoption of such Benchmark Replacement in a manner
substantially consistent with market practice (or, if the Issuer or its designee decides that
adoption of any portion of such market practice is not administratively feasible or if the
Issuer or its designee determines that no market practice for use of the Benchmark
Replacement exists, in such other manner as the Issuer or its designee determines is
reasonably necessary);
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“Benchmark Replacement Date” means the earliest to occur of the following events with
respect to the then current Benchmark (including any daily published component used in the
calculation thereof):
(i) in the case of sub-paragraph (i) or (ii) of the definition of “Benchmark Transition
Event”, the later of:
(a) the date of the public statement or publication of information referenced therein;
and
(b) the date on which the administrator of the Benchmark permanently or
indefinitely ceases to provide the Benchmark (or such component); or
(ii) in the case of sub-paragraph (iii) of the definition of “Benchmark Transition Event”,
the date of the public statement or publication of information referenced therein.
For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date
occurs on the same day as, but earlier than, the Reference Time in respect of any
determination, the Benchmark Replacement Date will be deemed to have occurred prior to
the Reference Time for such determination;
“designee” means a designee as selected and separately appointed by the Issuer in writing;
“ISDA Definitions” means (i) if “2006 ISDA Definitions” is specified hereon, the 2006
ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc.
(“ISDA”), as amended and updated as at the Issue Date of the first Tranche of the Notes;
or (ii) if “2021 ISDA Definitions” is specified hereon, the latest version of the 2021 ISDA
Interest Rate Derivatives Definitions, including any Matrices referred to therein, as
published by ISDA as at the Issue Date of the first Tranche of the Notes;
“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or
negative value or zero) that would apply for derivatives transactions referencing the ISDA
Definitions to be determined upon the occurrence of an index cessation event with respect
to the Benchmark;
“ISDA Fallback Rate” means the rate that would apply for derivatives transactions
referencing the ISDA Definitions to be effective upon the occurrence of an index cessation
date with respect to the Benchmark (including any daily published component used in the
calculation thereof) for the applicable tenor excluding the applicable ISDA Fallback
Adjustment;
“Reference Time” with respect to any determination of the Benchmark means (1) if the
Benchmark is the SOFR Benchmark, the SOFR Determination Time (where Simple SOFR
Average or Compounded Daily SOFR is specified as applicable hereon) or SOFR Index
Determination Time (where Compounded SOFR Index is specified as applicable hereon), or
(2) if the Benchmark is not the SOFR Benchmark, the time determined by the Issuer or its
designee after giving effect to the Benchmark Replacement Conforming Changes;
“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal
Reserve Bank of New York, or a committee officially endorsed or convened by the Federal
Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto; and
“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the
Benchmark Replacement Adjustment.
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(F) Linear Interpolation
Where Linear Interpolation is specified hereon as applicable in respect of an Interest Accrual
Period, the Rate of Interest for such Interest Accrual Period shall be calculated by the Calculation
Agent by straight line linear interpolation by reference to two rates based on the relevant
Reference Rate (where Screen Rate Determination is specified hereon as applicable) or the
relevant Floating Rate Option (where ISDA Determination is specified hereon as applicable), one
of which shall be determined as if the Applicable Maturity were the period of time for which rates
are available next shorter than the length of the relevant Interest Accrual Period and the other of
which shall be determined as if the Applicable Maturity were the period of time for which rates
are available next longer than the length of the relevant Interest Accrual Period provided however
that if there is no rate available for the period of time next shorter or, as the case may be, next
longer, then the Calculation Agent shall determine such rate at such time and by reference to such
sources as it determines appropriate.
(c) Zero Coupon Notes: Where a Note the Interest Basis of which is specified to be Zero Coupon is repayable
prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date
shall be the Early Redemption Amount of such Note. As from the Maturity Date, the Rate of Interest for any
overdue principal of such a Note shall be a rate per annum (expressed as a percentage) equal to the
Amortisation Yield (as described in Condition 6(b)(i)).
(d) Dual Currency Notes: In the case of Dual Currency Notes, if the rate or amount of interest falls to be
determined by reference to a Rate of Exchange or a method of calculating Rate of Exchange, the rate or
amount of interest payable shall be determined in the manner specified hereon.
(e) Partly Paid Notes: In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon
Notes), interest will accrue as aforesaid on the paid-up principal amount of such Notes and otherwise as
specified hereon.
(f) Accrual of Interest: Interest shall cease to accrue on each Note on the due date for redemption unless, upon
due presentation, payment is improperly withheld or refused, in which event interest shall continue to accrue
(both before and after judgment) at the Rate of Interest in the manner provided in this Condition 5 to the
Relevant Date (as defined in Condition 8).
(g) Margin, Maximum Rate of Interest/Minimum Rate of Interest, Maximum Instalment
Amount/Minimum Instalment Amount and Maximum Redemption Amount/Minimum Redemption
Amount and Rounding:
(i) If any Margin is specified hereon (either (x) generally, or (y) in relation to one or more Interest Accrual
Periods), an adjustment shall be made to all Rates of Interest, in the case of (x), or the Rates of Interest
for the specified Interest Accrual Periods, in the case of (y), calculated in accordance with Condition
5(b) above by adding (if a positive number) or subtracting the absolute value (if a negative number)
of such Margin, subject always to the next paragraph.
(ii) If any Maximum Rate of Interest or Minimum Rate of Interest, Maximum Instalment Amount or
Minimum Instalment Amount or Maximum Redemption Amount or Minimum Redemption Amount is
specified hereon, then any Rate of Interest, Instalment Amount or Redemption Amount shall be subject
to such maximum or minimum, as the case may be.
(iii) For the purposes of any calculations required pursuant to these Conditions (unless otherwise specified),
(x) all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point (with 0.000005 of a percentage point being rounded up), (y)
all figures shall be rounded to seven significant figures (provided that if the eighth significant figure
is a 5 or greater, the seventh significant figure shall be rounded up) and (z) all currency amounts that
fall due and payable shall be rounded to the nearest unit of such currency (with half a unit being
rounded up), save in the case of yen, which shall be rounded down to the nearest yen. For these
purposes, “unit” means the lowest amount of such currency that is available as legal tender in the
jurisdiction(s) of such currency.
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(h) Calculations: The amount of interest payable per Calculation Amount in respect of any Note for any Interest
Accrual Period shall be equal to the product of the Rate of Interest, the Calculation Amount specified hereon,
and the Day Count Fraction for such Interest Accrual Period, unless an Interest Amount (or a formula for its
calculation) is applicable to such Interest Accrual Period, in which case the amount of interest payable per
Calculation Amount in respect of such Note for such Interest Accrual Period shall equal such Interest Amount
(or be calculated in accordance with such formula). Where any Interest Period comprises two or more
Interest Accrual Periods, the amount of interest payable per Calculation Amount in respect of such Interest
Period shall be the sum of the Interest Amounts payable in respect of each of those Interest Accrual Periods.
In respect of any other period for which interest is required to be calculated, the provisions above shall apply
save that the Day Count Fraction shall be for the period for which interest is required to be calculated.
(i) Determination and Publication of Rates of Interest, Interest Amounts, Final Redemption Amounts,
Early Redemption Amounts, Optional Redemption Amounts and Instalment Amounts: The Calculation
Agent shall, as soon as practicable on each Interest Determination Date, or such other time on such date as
the Calculation Agent may be required to calculate any rate or amount, obtain any quotation or make any
determination or calculation, determine such rate and calculate the Interest Amounts for the relevant Interest
Accrual Period, calculate the Final Redemption Amount, Early Redemption Amount, Early Redemption
Amount (Change of Control), Early Redemption Amount (No Registration Event), Optional Redemption
Amount or Instalment Amount, obtain such quotation or make such determination or calculation, as the case
may be, and cause the Rate of Interest and the Interest Amounts for each Interest Accrual Period and the
relevant Interest Payment Date and, if required to be calculated, the Final Redemption Amount, Early
Redemption Amount, Early Redemption Amount (Change of Control), Early Redemption Amount (No
Registration Event), Optional Redemption Amount or Instalment Amount to be notified to the Trustee, the
Issuer, the Guarantor, each of the Paying Agents, each of the Transfer Agents, the Noteholders, any other
Calculation Agent appointed in respect of the Notes that is to make a further calculation upon receipt of such
information and if the Notes are listed and/or admitted to trading on a stock exchange and the rules of such
exchange or other relevant authority so require, such exchange or other relevant authority as soon as possible
after their determination but in no event later than (i) the commencement of the relevant Interest Period, if
determined prior to such time, in the case of notification to such exchange of a Rate of Interest and Interest
Amount, or (ii) in all other cases, the fourth Business Day after such determination. Where any Interest
Payment Date or Interest Period Date is subject to adjustment pursuant to Condition 5(b)(ii), the Interest
Amounts and the Interest Payment Date so published may subsequently be amended (or appropriate
alternative arrangements made with the consent of the Trustee by way of adjustment) without notice in the
event of an extension or shortening of the Interest Period. If the Notes become due and payable under
Condition 9, the accrued interest and the Rate of Interest payable in respect of the Notes shall nevertheless
continue to be calculated as previously in accordance with this Condition 5 but no publication of the Rate
of Interest or the Interest Amount so calculated need be made unless the Trustee otherwise requires. The
determination of any rate or amount, the obtaining of each quotation and the making of each determination
or calculation by the Calculation Agent(s) shall (in the absence of manifest error) be final and binding upon
all parties.
(j) Definitions: In these Conditions, unless the context otherwise requires, the following defined terms shall
have the meanings set out below:
“Adjustment Spread” means either (a) a spread (which may be positive, negative or zero) or (b) a formula
or methodology for calculating a spread, in each case to be applied to the relevant Successor Rate or
Alternative Rate (as the case may be) and is the spread, formula or methodology which:
(i) in the case of a Successor Rate, is formally recommended, or formally provided as an option for parties
to adopt, in relation to the replacement of the Original Reference Rate with the Successor Rate by any
Relevant Nominating Body; or
(ii) (if no such recommendation has been made, or in the case of an Alternative Rate), the Issuer, following
consultation with the Independent Adviser, determines, is customarily applied to the relevant Successor
Rate or Alternative Rate (as the case may be) in international debt capital markets transactions to
produce an industry-accepted replacement rate for the Original Reference Rate; or
(iii) (if the Issuer determines that no such spread is customarily applied), the Issuer, following consultation
with the Independent Adviser, determines, is recognised or acknowledged as being the industry
71
standard for over-the-counter derivative transactions which reference the Original Reference Rate,
where such rate has been replaced by the Successor Rate or the Alternative Rate (as the case may be);
or
(iv) (if the Issuer determines that no such industry standard is recognised or acknowledged), the Issuer,
following consultation with the Independent Adviser, determines to be appropriate to reduce or
eliminate, to the extent reasonably practicable in the circumstances, any economic prejudice or benefit
(as the case may be) to Noteholders as a result of the replacement of the Original Reference Rate with
the Successor Rate or the Alternative Rate (as the case may be).
“Alternative Rate” means an alternative benchmark or screen rate which the Issuer following consultation
with the Independent Adviser determines in accordance with Condition 5(b)(iii)(D) is customary in market
usage in international debt capital markets for the purposes of determining floating rates of interest (or the
relevant component part thereof) for a commensurate period and in the Specified Currency.
“Applicable Maturity” means: (a) in relation to Screen Rate Determination, the period of time designated
in the Reference Rate, and (b) in relation to ISDA Determination, the Designated Maturity.
“Benchmark Amendments” has the meaning given to it in Condition 5(b)(iii)(D)(aa).
“Benchmark Event” means:
(i) the Original Reference Rate has ceased to be published on the Relevant Screen Page as a result of such
benchmark ceasing to be calculated or administered; or
(ii) a public statement by the administrator of the Original Reference Rate that (in circumstances where no
successor administrator has been or will be appointed that will continue publication of such Original
Reference Rate) it has ceased or will cease publishing such Original Reference Rate permanently or
indefinitely; or
(iii) a public statement by the supervisor of the administrator of the Original Reference Rate that such
Original Reference Rate has been or will be permanently or indefinitely discontinued; or
(iv) a public statement by the supervisor of the administrator of the Original Reference Rate that means that
such Original Reference Rate will be prohibited from being used or that its use will be subject to
restrictions or adverse consequences, either generally or in respect of the Notes; or
(v) a public statement by the supervisor of the administrator of the Original Reference Rate (as applicable)
that, in the view of such supervisor, (i) such Original Reference Rate is no longer representative of an
underlying market or (ii) the methodology to calculate such Original Reference Rate has materially
changed; or
(vi) it has become unlawful for the Calculation Agent, the Issuer or the Paying Agents to calculate any
payments due to be made to any Noteholder or Couponholder using the Original Reference Rate (as
applicable) (including, without limitation, under the Benchmarks Regulation (EU) 2016/1011, if
applicable).
Notwithstanding the sub-paragraphs above, where the relevant Benchmark Event is a public statement within
sub-paragraphs (ii), (iii) or (iv) above, the Benchmark Event shall occur on the date of the cessation of
publication of the Original Reference Rate, the discontinuation of the Original Reference Rate, or the
prohibition of use of the Original Reference Rate, as the case may be, and not the date of the relevant public
statement.
“Business Day” means:
(i) in the case of Notes denominated in a currency other than euro or Renminbi, a day (other than a
Saturday, Sunday or public holiday) on which commercial banks and foreign exchange markets settle
payments in the principal financial centre for such currency; and/or
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(ii) in the case of Notes denominated in euro, a day on which T2 is open for the settlement of payments
in euro (a “TARGET Business Day”); and/or
(iii) in the case of Notes denominated in Renminbi, a day (other than a Saturday, Sunday or public holiday)
on which commercial banks and foreign exchange markets are open for business and settlement of
Renminbi payments in Hong Kong; and/or
(iv) in the case of Notes denominated in a currency and/or one or more Business Centres specified hereon,
a day (other than a Saturday, Sunday or public holiday) on which commercial banks and foreign
exchange markets settle payments in such currency in the Business Centre(s) or, if no currency is
indicated, generally in each of the Business Centres.
“Day Count Fraction” means, in respect of the calculation of an amount of interest on any Note for any
period of time (from and including the first day of such period to but excluding the last) (whether or not
constituting an Interest Period or an Interest Accrual Period, the “Calculation Period”):
(i) if “Actual/Actual” or “Actual/Actual – ISDA” is specified hereon, the actual number of days in the
Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the
sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year
divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in
a non-leap year divided by 365);
(ii) if “Actual/365 (Fixed)” is specified hereon, the actual number of days in the Calculation Period
divided by 365;
(iii) if “Actual/365 (Sterling)” is specified hereon, the actual number of days in the Calculation Period
divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;
(iv) if “Actual/360” is specified hereon, the actual number of days in the Calculation Period divided by
360;
(v) if “30/360”, “360/360” or “Bond Basis” is specified hereon, the number of days in the Calculation
Period divided by 360, calculated on a formula basis as follows:
[360 x (Y2 – Y1)] + [30 x (M2 – M1)] + (D2 – D1)
Day Count Fraction =
360
where:
“Y 1” is the year, expressed as a number, in which the first day of the Calculation Period falls;
“Y 2” is the year, expressed as a number, in which the day immediately following the last day included
in the Calculation Period falls;
“M 1” is the calendar month, expressed as a number, in which the first day of the Calculation Period
falls;
“M 2” is the calendar month, expressed as a number, in which the day immediately following the last
day included in the Calculation Period falls;
“D 1” is the first calendar day, expressed as a number, of the Calculation Period, unless such number
would be 31, in which case D1 will be 30; and
“D 2” is the calendar day, expressed as a number, immediately following the last day included in the
Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will
be 30;
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(vi) if “30E/360” or “Eurobond Basis” is specified hereon, the number of days in the Calculation Period
divided by 360, calculated on a formula basis as follows:
[360 x (Y2 – Y1)] + [30 x (M2 – M1)] + (D2 – D1)
Day Count Fraction =
360
where:
“Y 1” is the year, expressed as a number, in which the first day of the Calculation Period falls;
“Y 2” is the year, expressed as a number, in which the day immediately following the last day included
in the Calculation Period falls;
“M 1” is the calendar month, expressed as a number, in which the first day of the Calculation Period
falls;
“M 2” is the calendar month, expressed as a number, in which the day immediately following the last
day included in the Calculation Period falls;
“D 1” is the first calendar day, expressed as a number, of the Calculation Period, unless such number
would be 31, in which case D1 will be 30; and
“D 2” is the calendar day, expressed as a number, immediately following the last day included in the
Calculation Period, unless such number would be 31, in which case D2 will be 30;
(vii) if “30E/360 (ISDA)” is specified hereon, the number of days in the Calculation Period divided by 360,
calculated on a formula basis as follows:
[360 x (Y2 – Y1)] + [30 x (M2 – M1)] + (D2 – D1)
Day Count Fraction =
360
where:
“Y 1” is the year, expressed as a number, in which the first day of the Calculation Period falls;
“Y 2” is the year, expressed as a number, in which the day immediately following the last day included
in the Calculation Period falls;
“M 1” is the calendar month, expressed as a number, in which the first day of the Calculation Period
falls;
“M 2” is the calendar month, expressed as a number, in which the day immediately following the last
day included in the Calculation Period falls;
“D 1” is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that day is
the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
“D 2” is the calendar day, expressed as a number, immediately following the last day included in the
Calculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such
number would be 31, in which case D2 will be 30;
(viii) if “Actual/Actual-ICMA” is specified hereon,
(a) if the Calculation Period is equal to or shorter than the Determination Period during which it falls,
the number of days in the Calculation Period divided by the product of (x) the number of days
in such Determination Period and (y) the number of Determination Periods normally ending in
any year; and
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(b) if the Calculation Period is longer than one Determination Period, the sum of:
(x) the number of days in such Calculation Period falling in the Determination Period in which
it begins divided by the product of (1) the number of days in such Determination Period and
(2) the number of Determination Periods normally ending in any year; and
(y) the number of days in such Calculation Period falling in the next Determination Period
divided by the product of (1) the number of days in such Determination Period and (2) the
number of Determination Periods normally ending in any year
where:
“Determination Period” means the period from and including a Determination Date in any year to but
excluding the next Determination Date; and
“Determination Date” means the date(s) specified as such hereon or, if none is so specified, the
Interest Payment Date(s).
“Euro-zone” means the region comprised of member states of the European Union that adopt the single
currency in accordance with the Treaty establishing the European Community, as amended.
“Independent Adviser” means an independent financial institution of international repute or an
independent financial adviser with appropriate expertise appointed by the Issuer under Condition
5(b)(iii)(D)(x).
“Interest Accrual Period” means the period beginning on (and including) the Interest Commencement
Date and ending on (but excluding) the first Interest Period Date and each successive period beginning
on (and including) an Interest Period Date and ending on (but excluding) the next succeeding Interest
Period Date.
“Interest Amount” means:
(i) in respect of an Interest Accrual Period, the amount of interest payable per Calculation Amount
for that Interest Accrual Period and which, in the case of Fixed Rate Notes and unless otherwise
specified hereon, shall mean the Fixed Coupon Amount or Broken Amount specified hereon as
being payable on the Interest Payment Date ending the Interest Period of which such Interest
Accrual Period forms part; and
(ii) in respect of any other period, the amount of interest payable per Calculation Amount for that
period.
“Interest Commencement Date” means the Issue Date or such other date as may be specified hereon.
“Interest Determination Date” means, with respect to a Rate of Interest and Interest Accrual Period,
the date specified as such hereon or, if none is so specified, (i) the first day of such Interest Accrual
Period if the Specified Currency is Sterling, Hong Kong dollars or Renminbi other than where the
Specified Currency is Renminbi and the Reference Rate is CNH HIBOR; or (ii) the day falling two
Business Days in London for the Specified Currency prior to the first day of such Interest Accrual
Period if the Specified Currency is neither Sterling nor euro nor Hong Kong dollars nor Renminbi; or
(iii) the day falling two TARGET Business Days prior to the first day of such Interest Accrual Period
if the Specified Currency is euro; or (iv) the day falling two Business Days in Hong Kong prior to the
first day of such Interest Accrual Period if the Specified Currency is Renminbi and the Reference Rate
is CNH HIBOR, and “Business Day in Hong Kong” and “Business Day in London” means a day
(other than a Saturday, Sunday or public holiday) on which commercial banks and foreign exchange
markets settle payments in Hong Kong (in the case of Business Day in Hong Kong), or London (in the
case of Business day in London), as the case may be.
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“Interest Period” means the period beginning on and including the Interest Commencement Date and
ending on but excluding the first Interest Payment Date and each successive period beginning on and
including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment
Date unless otherwise specified thereon.
“Interest Period Date” means each Interest Payment Date unless otherwise specified hereon.
“ISDA Benchmarks Supplement” means the Benchmarks Supplement (as amended and updated as at
the date of issue of the first Tranche of the Notes of the relevant Series (as specified hereon)) published
by the International Swaps and Derivatives Association, Inc.
“ISDA Definitions” means the 2006 ISDA Definitions, as amended and supplemented and published
by the International Swaps and Derivatives Association, Inc., unless otherwise specified hereon and, if
specified as such hereon, as supplemented by the ISDA Benchmarks Supplement.
“Original Reference Rate” means the originally-specified benchmark or screen rate (as applicable)
used to determine the Rate of Interest (or any component part thereof) on the Notes.
“Rate of Interest” means the rate of interest payable from time to time in respect of the Notes and that
is either specified or calculated in accordance with the provisions hereon.
“Reference Banks” means, in the case of a determination of EURIBOR, the principal Euro-zone office
of four major banks in the Euro-zone inter-bank market and, in the case of a determination of HIBOR,
the principal Hong Kong office of four major banks in the Hong Kong inter-bank market and, in the
case of a determination of CNH HIBOR, the principal Hong Kong office of four major banks dealing
in Renminbi in the Hong Kong inter-bank market, in each case selected by the Issuer or as specified
hereon.
“Relevant Nominating Body” means, in respect of a benchmark or screen rate (as applicable):
(i) the central bank for the currency to which the benchmark or screen rate (as applicable) relates,
or any central bank or other supervisory authority which is responsible for supervising the
administrator of the benchmark or screen rate (as applicable); or
(ii) any working group or committee sponsored by, chaired or co-chaired by or constituted at the
request of (a) the central bank for the currency to which the benchmark or screen rate (as
applicable) relates, (b) any central bank or other supervisory authority which is responsible for
supervising the administrator of the benchmark or screen rate (as applicable), (c) a group of the
aforementioned central banks or other supervisory authorities or (d) the Financial Stability Board
or any part thereof.
“Reference Rate” means the rate specified as such hereon.
“Relevant Screen Page” means such page, section, caption, column or other part of a particular
information service as may be specified hereon (or any successor or replacement page, section, caption,
column or other part of a particular information service).
“Specified Currency” means the currency specified as such hereon or, if none is specified, the
currency in which the Notes are denominated.
“Successor Rate” means a successor to or replacement of the Original Reference Rate which is
formally recommended by any Relevant Nominating Body.
“T2” means the real time gross settlement system operated by the Eurosystem, or any successor system.
(k) Calculation Agent: The Issuer shall procure that there shall at all times be one or more Calculation Agents
if provision is made for them hereon and for so long as any Note or Coupon is outstanding (as defined in
the Trust Deed). Where more than one Calculation Agent is appointed in respect of the Notes, references in
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these Conditions to the Calculation Agent shall be construed as each Calculation Agent performing its
respective duties under these Conditions. If the Calculation Agent is unable or unwilling to act as such or
if the Calculation Agent fails duly to establish the Rate of Interest for an Interest Accrual Period or to
calculate any Interest Amount, Instalment Amount, Final Redemption Amount, Early Redemption Amount,
Early Redemption Amount (Change of Control), Early Redemption Amount (No Registration Event), or
Optional Redemption Amount, as the case may be, or to comply with any other requirement, the Issuer shall
(with prior written notice to the Trustee) appoint a leading bank or financial institution engaged in the
interbank market (or, if appropriate, money, swap or over-the-counter index options market) that is most
closely connected with the calculation or determination to be made by the Calculation Agent (acting through
its principal London office or any other office actively involved in such market) to act as such in its place.
The Calculation Agent may not resign its duties without a successor having been appointed as aforesaid.
6 REDEMPTION, PURCHASE AND OPTIONS
(a) Redemption by Instalments and Final Redemption:
(i) Unless previously redeemed or purchased and cancelled as provided in this Condition 6, each Note that
provides for Instalment Dates and Instalment Amounts shall be partially redeemed on each Instalment
Date at the related Instalment Amount specified hereon. The outstanding principal amount of each such
Note shall be reduced by the Instalment Amount (or, if such Instalment Amount is calculated by
reference to a proportion of the principal amount of such Note, such proportion) for all purposes with
effect from the related Instalment Date, unless payment of the Instalment Amount is improperly
withheld or refused, in which case, such amount shall remain outstanding until the Relevant Date
relating to such Instalment Amount.
(ii) Unless previously redeemed or purchased and cancelled as provided below, each Note shall be finally
redeemed on the Maturity Date specified hereon at its Final Redemption Amount (which, unless
otherwise provided hereon, is its principal amount) or, in the case of a Note falling within Condition
6(a)(i) above, its final Instalment Amount.
(b) Early Redemption:
(i) Zero Coupon Notes:
(A) The Early Redemption Amount payable in respect of any Zero Coupon Note, upon redemption of
such Note pursuant to Condition 6(c), Condition 6(e) or Condition 6(f) or upon it becoming due
and payable as provided in Condition 9 shall be the Amortised Face Amount (calculated as
provided below) of such Note unless otherwise specified in the relevant Pricing Supplement. The
Early Redemption Amount payable in respect of any Zero Coupon Note, upon redemption of such
Note pursuant to Condition 6(d), shall be as specified in the relevant Pricing Supplement.
(B) Subject to the provisions of sub-paragraph (C) below of this Condition 6(b)(i), the Amortised
Face Amount of any such Note shall be the scheduled Final Redemption Amount of such Note on
the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the
Amortisation Yield (which, if none is shown hereon, shall be such rate as would produce an
Amortised Face Amount equal to the issue price of the Notes if they were discounted back to their
issue price on the Issue Date) compounded annually.
(C) If the Early Redemption Amount payable in respect of any such Note upon its redemption
pursuant to Condition 6(c), Condition 6(e) or Condition 6(f) or upon it becoming due and payable
as provided in Condition 9 is not paid when due, the Early Redemption Amount due and payable
in respect of such Note shall be the Amortised Face Amount of such Note as defined in
sub-paragraph (B) above of this Condition 6(b)(i), except that such sub-paragraph shall have
effect as though the date on which the Note becomes due and payable were the Relevant Date.
The calculation of the Amortised Face Amount in accordance with this sub-paragraph shall
continue to be made (both before and after judgment) until the Relevant Date, unless the Relevant
Date falls on or after the Maturity Date, in which case the amount due and payable shall be the
scheduled Final Redemption Amount of such Note on the Maturity Date together with any interest
that may accrue in accordance with Condition 5(c).
Where such calculation is to be made for a period of less than one year, it shall be made on the basis
of the Day Count Fraction shown hereon.
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(ii) Other Notes: The Early Redemption Amount payable in respect of any Note (other than Notes described
in Condition 6(b)(i) above), upon redemption of such Note pursuant to Condition 6(c), Condition 6(e)
or Condition 6(f) or upon it becoming due and payable as provided in Condition 9, shall be the Final
Redemption Amount unless otherwise specified hereon.
(c) Redemption for Taxation Reasons: The Notes may be redeemed at the option of the Issuer in whole, but
not in part, on any Interest Payment Date (if this Note is a Floating Rate Note) or at any time (if this Note
is not a Floating Rate Note), on giving not less than 30 nor more than 60 days’ notice to the Noteholders in
accordance with Condition 16 (which notice shall be irrevocable) and in writing to the Trustee and the
Issuing and Paying Agent at their Early Redemption Amount (as described in Condition 6(b) above) (together
with any unpaid interest accrued to but excluding the date fixed for redemption), if the Issuer (or, if the
relevant Guarantee was called, the Guarantor) satisfies the Trustee immediately prior to the giving of such
notice that (i) the Issuer (or, if the Guarantee was called, the Guarantor) has or will become obliged to pay
Additional Tax Amounts as provided or referred to in Condition 8 as a result of any change in, or amendment
to, the laws or regulations of the British Virgin Islands or the PRC or, in each case, any political subdivision
or any authority thereof or therein having power to tax, or any change in the application or official
interpretation of such laws or regulations (including but not limited to any decision by a court of competent
jurisdiction), which change or amendment becomes effective on or after the date on which agreement is
reached to issue the first Tranche of the Notes, and (ii) such obligation cannot be avoided by the Issuer (or
the Guarantor, as the case may be) taking reasonable measures available to it, provided that no such notice
of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer (or the
Guarantor, as the case may be) would be obliged to pay such Additional Tax Amounts were a payment in
respect of the Notes (or the Guarantee, as the case may be) then due.
Prior to the giving of any notice for redemption pursuant to this Condition 6(c), the Issuer (or the Guarantor,
as the case may be) shall deliver to the Trustee (A) a certificate in English signed by any Authorised
Signatory of the Issuer (or by any Authorised Signatory of the Guarantor, as the case may be) stating that
the obligation referred to in Condition 6(c)(i) above cannot be avoided by the Issuer (or the Guarantor, as
the case may be) taking reasonable measures available to it and (B) an opinion, addressed to and in form and
substance satisfactory to the Trustee, of independent tax or legal advisers of recognised standing to the effect
that the Issuer (or the Guarantor, as the case may be) has or will become obliged to pay such Additional Tax
Amounts as a result of such change or amendments. The Trustee shall be entitled (but shall not be obliged)
to accept such certificate and opinion without further investigation or query and without liability to the
Noteholders or any other person and may accept the same as sufficient evidence of the satisfaction of the
conditions precedent set out in (i) and (ii) above of this Condition 6(c), in which event the same shall be
conclusive and binding on the Noteholders, Receiptholders and Couponholders. The Trustee shall be
protected and shall have no liability to any Noteholder, any Couponholder, the Issuer, the Guarantor or any
other person for so accepting and relying on any such certificate and opinion. All Notes in respect of which
any notice of redemption is given under this Condition 6(c) shall be redeemed on the date specified in such
notice in accordance with this Condition 6(c).
(d) Redemption for Relevant Events: At any time following the occurrence of a Relevant Event, the holder of
any Note will have the right, at such holder’s option, to require the Issuer to redeem all but not some only
of that holder’s Notes on the Put Settlement Date (as defined below) at the Early Redemption Amount
(Change of Control) (in the case of a redemption for a Change of Control) or the Early Redemption Amount
(No Registration Event) (in the case of a redemption for a No Registration Event) of their principal amount,
together in each case with any unpaid interest accrued to but excluding the Put Settlement Date. To exercise
such right, the holder of the relevant Note must deposit (in the case of Bearer Notes) such Note (together
with all unmatured Receipts and Coupons and unexchanged Talons) with any Paying Agent or (in the case
of Registered Notes) the Certificate representing such Note(s) with the Registrar or any Transfer Agent at
its specified office, together with a duly completed and signed notice of redemption, substantially in the form
scheduled to the Agency Agreement, obtainable from the specified office of any Paying Agent, the Registrar
or any Transfer Agent (as applicable) (a “Put Exercise Notice”), by not later than 30 days following a
Relevant Event, or, if later, 30 days following the date upon which notice thereof is given to Noteholders by
the Issuer in accordance with Condition 16. The “Put Settlement Date” shall be the fourteenth day (in the
case of a redemption for a Change of Control) or the fifth day (in the case of a redemption for a No
Registration Event) after the expiry of such period of 30 days as referred to above.
A Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shall redeem the Notes which are
the subject of the Put Exercise Notices delivered as aforesaid on the Put Settlement Date.
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The Issuer shall give notice to the Noteholders (in accordance with Condition 16) and to the Trustee and the
Issuing and Paying Agent in writing by not later than 14 Payment Business Days (in the case of a redemption
for a Change of Control) or five Payment Business Days (in the case of a redemption for a No Registration
Event) following the first day on which it becomes aware of the occurrence of a Relevant Event, which notice
shall specify the procedure for exercise by the Noteholders of their rights to require redemption of the Notes
pursuant to this Condition 6(d).
Neither the Trustee nor the Agents shall be required to take any steps to ascertain or monitor whether a
Relevant Event or any event which could lead to a Relevant Event has occurred or may occur and each of
them shall be entitled to assume that no such event has occurred until it has received written notice to the
contrary from the Issuer or the Guarantor, and none of the Trustee or the Agents shall be responsible or liable
to Noteholders, the Receiptholders, the Couponholders, the Issuer, the Guarantor or any other person for any
loss or liability arising from any failure to do so. The Trustee shall not be required to investigate or verify
the accuracy, content, completeness or genuineness of any document provided to it by the Issuer, the
Guarantor or any other person as part of or in connection with or to enable satisfaction of the Registration
Condition, and may rely conclusively on any such document, and shall not be responsible for or liable to the
Noteholders, the Receiptholders, the Couponholders, the Issuer, the Guarantor or any other person for any
loss or liability arising from so doing.
For the purposes of these Conditions:
a “Change of Control” occurs when:
(i) the Guarantor ceases to directly or indirectly, hold or own all the issued share capital of the Issuer; or
(ii) the Guarantor consolidates with or merges into or sells or transfers all or substantially all of its assets
to any person or persons, acting together, other than (A) any of the Guarantor or its Subsidiaries or (B)
the State-owned Assets Supervision and Administration Commission of the State Council of the PRC
(“SASAC”) or its successor or entities controlled (directly or indirectly) by SASAC, or any Person
directly or indirectly controlled by the central government of the PRC; or
(iii) other than SASAC or its successor or entities controlled (directly or indirectly) by SASAC, or any
Person directly or indirectly controlled by the central government of the PRC, any Person or Persons,
acting as a group, acquires Control directly or indirectly or in combination (through Subsidiaries) of
the Guarantor;
“Control” means:
(i) the ownership, acquisition or control of more than 50 per cent. of the voting rights of the issued share
capital of a Person; or
(ii) the right to appoint and/or remove the majority of the members of a Person’s board of directors or other
governing body, whether obtained directly or indirectly, and whether obtained by ownership of share
capital, the possession of voting rights, contract or otherwise; or
(iii) the possession, directly or indirectly, of the power to direct or cause the direction of the management
policies of a Person,
and the terms “controlling” and “controlled” have meanings correlative to the foregoing;
“Early Redemption Amount (Change of Control)” means, in respect of any Note, 101 per cent. of its
principal amount or such other amount as may be specified or determined hereon;
“Early Redemption Amount (No Registration Event)” means, in respect of any Note, its principal amount
or such other amount as may be specified or determined hereon;
a “No Registration Event” occurs when the Registration Condition is not complied with by the Registration
Deadline;
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a “Person” includes any individual, company, corporation, firm, partnership, joint venture, undertaking,
association, organisation, trust, state or agency of state (in each case whether or not being a separate legal
entity);
“Registration Condition” means the receipt by the Trustee of (in the case where Condition 4(a)(ii) applies)
the Registration Documents or (in the case where Condition 4(a)(iii) applies) the SAFE Registration
Documents; and
a “Relevant Event” means a Change of Control or a No Registration Event.
(e) Redemption at the Option of the Issuer (Call Option): If Call Option is specified hereon, the Issuer may,
on giving not less than 15 nor more than 30 days’ irrevocable notice to the Noteholders (in accordance with
Condition 16) and in writing to the Trustee and the Issuing and Paying Agent (or such other notice period
as may be specified hereon) redeem all or, if so provided, some of the Notes on any Optional Redemption
Date specified hereon. Any such redemption of Notes shall be at their Optional Redemption Amount
specified hereon (which may be the Early Redemption Amount (as described in Condition 6(b) above)),
together with unpaid interest accrued to (but excluding) the date fixed for redemption. Any such redemption
must relate to Notes of a principal amount at least equal to the Minimum Redemption Amount to be redeemed
specified hereon and no greater than the Maximum Redemption Amount to be redeemed specified hereon.
All Notes in respect of which any such notice is given shall be redeemed, on the date specified in such notice
in accordance with this Condition 6(e).
In the case of a partial redemption, the notice to Noteholders shall also contain the certificate numbers of
the Bearer Notes or, in the case of Registered Notes shall specify the principal amount of Registered Notes
drawn and the holder(s) of such Registered Notes to be redeemed, which shall have been drawn in such place
and in such manner as may be fair and reasonable in the circumstances, taking account of prevailing market
practices, subject to compliance with any applicable laws and stock exchange or other relevant authority
requirements.
(f) Redemption at the Option of Noteholders (Put Option): If Put Option is specified hereon, the Issuer shall,
at the option of the holder of any such Note, upon the holder of such Note giving not less than 15 nor more
than 30 days’ irrevocable notice to the Issuer (or such other notice period as may be specified hereon) redeem
such Note on the Optional Redemption Date(s) specified hereon at its Optional Redemption Amount
specified hereon (which may be the Early Redemption Amount (as described in Condition 6(b) above)),
together with unpaid interest accrued to (but excluding) the date fixed for redemption.
To exercise such option the holder must deposit (in the case of Bearer Notes) such Note (together with all
unmatured Receipts and Coupons and unexchanged Talons) with any Paying Agent or (in the case of
Registered Notes) the Certificate representing such Note(s) with the Registrar or any Transfer Agent at its
specified office, together with a duly completed option exercise notice (an “Exercise Notice”) in the form
for the time being current, obtainable from any Paying Agent, the Registrar or any Transfer Agent (as
applicable) within the notice period. No Note or Certificate so deposited and option exercised may be
withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer.
(g) Notice of Redemption: All Notes in respect of which any notice of redemption is given under this Condition
6 shall be redeemed on the date, in such place and in such manner as specified in such notice in accordance
with this Condition 6. If there is more than one notice of redemption given in respect of any Note, the notice
given first in time shall prevail and in the event of two notices being given on the same date, the first to be
given shall prevail.
(h) Partly Paid Notes: Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise,
in accordance with the provisions of this Condition 6 and the provisions specified hereon.
(i) Purchases: The Issuer, the Guarantor and their respective Subsidiaries may at any time purchase Notes
(provided that all unmatured Receipts and Coupons and unexchanged Talons relating thereto are attached
thereto or surrendered therewith) in the open market or otherwise at any price. The Notes so purchased, while
held by or on behalf of the Issuer, the Guarantor or any such Subsidiary, shall not entitle the holder to vote
at any meetings of the Noteholders and shall not be deemed to be outstanding for certain purposes, including
without limitation for the purposes of calculating quorums at meetings of the Noteholders and for the
purposes of Conditions 9, 12(a) and 14.
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(j) Cancellation: All Notes purchased or beneficially held by or on behalf of the Issuer, the Guarantor or any
of their respective Subsidiaries shall be surrendered for cancellation, in the case of Bearer Notes, by
surrendering each such Note together with all unmatured Receipts and Coupons and all unexchanged Talons
to the Issuing and Paying Agent and, in the case of Registered Notes, by surrendering the Certificate
representing such Notes to the Registrar and, in each case, if so surrendered, shall, together with all Notes
redeemed by the Issuer, be cancelled forthwith (together with all unmatured Receipts and Coupons and
unexchanged Talons attached thereto or surrendered therewith). Any Notes so surrendered for cancellation
may not be reissued or resold and the obligations of the Issuer and the Guarantor in respect of any such Notes
shall be discharged.
7 PAYMENTS AND TALONS
(a) Bearer Notes: Payments of principal and interest in respect of Bearer Notes shall, subject as mentioned
below, be made against presentation and surrender of the relevant Receipts (in the case of payments of
Instalment Amounts other than on the due date for redemption and provided that the Receipt is presented for
payment together with its relevant Note), Notes (in the case of all other payments of principal and, in the
case of interest, as specified in Condition 7(f)(vi)) or Coupons (in the case of interest, save as specified in
Condition 7(f)(ii) and Condition 7(f)(vi)), as the case may be:
(i) in the case of Notes denominated in a currency other than Renminbi, at the specified office of any
Paying Agent outside the United States by a cheque payable in the relevant currency drawn on, or, at
the option of the holder, by transfer to an account denominated in such currency with, a Bank;
(ii) in the case of Notes denominated in Renminbi, by transfer from the relevant Paying Agent’s office
outside the United States to a Renminbi account maintained by or on behalf of the Noteholder with a
Bank.
In this Condition 7(a) and Condition 7(c), “Bank” means a bank in the principal financial centre for such
currency or, in the case of euro, in a city in which banks have access to T2 or, in the case of Renminbi, in
Hong Kong.
(b) Payments in the United States: Notwithstanding the foregoing, if any Bearer Notes are denominated in U.S.
dollars, payments in respect thereof may be made at the specified office of any Paying Agent in New York
City in the same manner as aforesaid if (i) the Issuer shall have appointed Paying Agents with specified
offices outside the United States with the reasonable expectation that such Paying Agents would be able to
make payment of the amounts on the Notes in the manner provided above when due, (ii) payment in full of
such amounts at all such offices is illegal or effectively precluded by exchange controls or other similar
restrictions on payment or receipt of such amounts and (iii) such payment is then permitted by United States
law, without involving, in the opinion of the Issuer, any adverse tax consequence to the Issuer.
(c) Registered Notes:
(i) Payments of principal (which for the purposes of this Condition 7(c) shall include final Instalment
Amounts but not other Instalment Amounts) in respect of Registered Notes shall be made against
presentation and surrender of the relevant Certificates at the specified office of any of the Transfer
Agents or of the Registrar and in the manner provided in Condition 7(c)(ii).
(ii) Interest (which for the purpose of this Condition 7(c) shall include all Instalment Amounts other than
final Instalment Amounts) on Registered Notes shall be paid to the person shown on the Register at the
close of business on the fifth business day before the due date for payment thereof (the “Record
Date”). Payments of interest on each Registered Note shall be made in the relevant currency by transfer
to a registered account of the relevant Noteholder. In this Condition 7(c), “business day” means a day,
other than a Saturday, Sunday or public holiday, on which the relevant Registrar is open for business
in the place of its specified office.
In this Condition 7(c), a “registered account” of the Noteholder means the account maintained by or
on behalf of the Noteholder with a Bank, details of which appear on the Register at the close of business
on the Record Date.
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So long as the Notes are represented by the Global Certificate and such Global Certificate is held on
behalf of Euroclear or Clearstream or any other clearing system (except as provided in the paragraph
below), each payment in respect of the Global Certificate will be made to, or to the order of, the person
shown as the holder of the Notes in the Register at the close of business on the record date which shall
be on the Clearing System Business Day immediately prior to the due date for such payment, where
“Clearing System Business Day” means a weekday (Monday to Friday, inclusive) except for 25
December and 1 January.
Payments of principal and interest in respect of Registered Notes held in the CMU will be made to the
CMU for their distribution, on the order of the holder of the Registered Notes, to the person(s) for
whose account(s) interests in the relevant Registered Note are credited as being held with the CMU in
accordance with the CMU Rules at the relevant time and payment made in accordance thereof shall
discharge the obligations of the Issuer in respect of that payment.
(d) Payments subject to Laws: All payments are subject in all cases to (i) any applicable fiscal or other laws,
regulations and directives in the place of payment but without prejudice to the provisions of Condition 8 and
(ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S.
Internal Revenue Code of 1986, as amended (the “Code”) or otherwise imposed pursuant to Sections 1471
through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or
(without prejudice to the provisions of Condition 8) any law implementing an intergovernmental approach
thereto. No commission or expenses shall be charged to the Noteholders, Receiptholders or Couponholders
in respect of such payments.
(e) Appointment of Agents: The Issuing and Paying Agent, the CMU Lodging and Paying Agent, the other
Paying Agents, the Registrar, the Transfer Agents and the Calculation Agent(s) initially appointed by the
Issuer and the Guarantor and their respective specified offices are listed below. The Issuing and Paying
Agent, the CMU Lodging and Paying Agent, the other Paying Agents, the Registrar, the Transfer Agents and
the Calculation Agent, subject to the provisions of the Agency Agreement, act solely as agents of the Issuer
and the Guarantor (or, as provided in the Trust Deed, the Trustee) and do not assume any obligation or
relationship of agency or trust for or with any Noteholder, Receiptholders or Couponholder. The Issuer and
the Guarantor reserve the right at any time, with the approval of the Trustee, to vary or terminate the
appointment of the Issuing and Paying Agent, the CMU Lodging and Paying Agent, any other Paying Agent,
the Registrar, any Transfer Agent, the Calculation Agent(s) or any of the other Agents and to appoint
additional or other Agents, provided that the Issuer and the Guarantor shall at all times maintain (i) an Issuing
and Paying Agent, (ii) a Registrar in relation to Registered Notes, (iii) a Transfer Agent in relation to
Registered Notes, (iv) a CMU Lodging and Paying Agent in relation to Notes accepted for clearance through
the CMU, (v) one or more Calculation Agent(s) where these Conditions so require, and (vi) such other agents
as may be required by any other stock exchange on which the Notes may be listed.
In addition, the Issuer and the Guarantor shall forthwith appoint a Paying Agent in New York City in respect
of any Bearer Notes denominated in U.S. dollars in the circumstances described in Condition 7(b) above, in
each case appointed as contemplated in the Agency Agreement.
Notice of any such termination or appointment or any change of any specified office of an Agent shall
promptly be given by the Issuer to the Noteholders in accordance with Condition 16 and to the Trustee.
(f) Unmatured Coupons and Receipts and unexchanged Talons:
(i) Upon the due date for redemption of Bearer Notes which comprise Fixed Rate Notes (other than Dual
Currency Notes), such Notes should be surrendered for payment together with all unmatured Coupons
(if any) relating thereto, failing which an amount equal to the face value of each missing unmatured
Coupon (or, in the case of payment not being made in full, that proportion of the amount of such
missing unmatured Coupon that the sum of principal so paid bears to the total principal due) shall be
deducted from the Final Redemption Amount, Early Redemption Amount, Early Redemption Amount
(Change of Control), Early Redemption Amount (No Registration Event) or Optional Redemption
Amount, as the case may be, due for payment. Any amount so deducted shall be paid in the manner
mentioned above against surrender of such missing Coupon within a period of 10 years from the
Relevant Date for the payment of such principal (whether or not such Coupon has become void
pursuant to Condition 9).
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(ii) Upon the due date for redemption of any Bearer Note comprising a Floating Rate Note, Dual Currency
Note, unmatured Coupons relating to such Note (whether or not attached) shall become void and no
payment shall be made in respect of them.
(iii) Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note
(whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon.
(iv) Upon the due date for redemption of any Bearer Note that is redeemable in instalments, all Receipts
relating to such Note having an Instalment Date falling on or after such due date (whether or not
attached) shall become void and no payment shall be made in respect of them.
(v) Where any Bearer Note that provides that the relevant unmatured Coupons are to become void upon
the due date for redemption of those Notes is presented for redemption without all unmatured Coupons,
and where any Bearer Note is presented for redemption without any unexchanged Talon relating to it,
redemption shall be made only against the provision of such indemnity as the Issuer may require.
(vi) If the due date for redemption of any Note is not a due date for payment of interest, interest accrued
from the preceding due date for payment of interest or the Interest Commencement Date, as the case
may be, shall only be payable against presentation (and surrender if appropriate) of the relevant Bearer
Note or Certificate representing it, as the case may be. Interest accrued on a Note that only bears
interest after its Maturity Date shall be payable on redemption of such Note against presentation of the
relevant Note or Certificate representing it, as the case may be.
(g) Talons: On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued
in respect of any Bearer Note, the Talon forming part of such Coupon sheet may be surrendered at the
specified office of the Issuing and Paying Agent on any business day in the location of the specified office
of the Issuing and Paying Agent in exchange for a further Coupon sheet (and if necessary another Talon for
a further Coupon sheet) (but excluding any Coupons that may have become void pursuant to Condition 9).
(h) Non-Payment Business Days: If any date for payment in respect of any Note, Receipt or Coupon is not a
Payment Business Day, the holder shall not be entitled to payment until the next following Payment Business
Day nor to any interest or other sum in respect of such postponed payment.
In these Conditions, “Payment Business Day” means a day (other than a Saturday, a Sunday or a public
holiday) on which banks and foreign exchange markets are open for business in the relevant place of
presentation, in such jurisdictions as shall be specified as “Additional Financial Centres” hereon and:
(i) (in the case of a payment in a currency other than euro and Renminbi) where payment is to be made
by transfer to an account maintained with a bank in the relevant currency, on which foreign exchange
transactions may be carried on in the relevant currency in the principal financial centre of the country
of such currency; or
(ii) (in the case of a payment in euro) which is a TARGET Business Day; or
(iii) (in the case of a payment in Renminbi) on which banks and foreign exchange markets are open for
business and settlement of Renminbi payments in Hong Kong.
For the purposes of any payments made in respect of a Global Note or a Global Certificate, the words “in
the relevant place of presentation” shall not apply in the definition of “Payment Business Day” in this
Condition 7(h).
8 TAXATION
All payments of principal, premium (if any) and interest by or on behalf of the Issuer or the Guarantor in respect
of the Notes, the Receipts, the Coupons or under the Guarantee shall be made free and clear of, and without
set-off or counterclaim and without withholding or deduction for or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed
by or within the British Virgin Islands or the PRC or, in each case, any political subdivision or any authority
therein or thereof having power to tax, unless such withholding or deduction is required by law.
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Where such withholding or deduction is made by the Issuer or, as the case may be, the Guarantor for or on
account of any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected,
withheld or assessed by or within the PRC up to and including the aggregate rate applicable as at the date on
which agreement is reached to issue the first Tranche of Notes (the “Applicable Rate”), the Issuer, or, as the case
may be, the Guarantor will increase the amounts paid by it to the extent required, so that the net amount received
by Noteholders, Receiptholders or Couponholders equals the amount which would otherwise have been
receivable by them had no such withholding or deduction been required.
If (i) the Issuer is required to make any deduction or withholding for or on account of any taxes, duties,
assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or
within the British Virgin Islands, or (ii) the Issuer or, as the case may be, the Guarantor is required to make a
deduction or withholding for or on account of any taxes, duties, assessments or governmental charges of
whatever nature imposed, levied, collected, withheld or assessed by or within the PRC in excess of the Applicable
Rate, then the Issuer (or the Guarantor, as the case may be) shall pay such additional amounts (“Additional Tax
Amounts”) as will result in receipt by the Noteholders, Receiptholders or Couponholders of such amounts as
would have been received by them had no such withholding or deduction been required, except that no Additional
Tax Amounts shall be payable in respect of any Note, Receipt or Coupon (or the Guarantee, as the case may be):
(a) Other Connection: held by or on behalf of a Noteholder, Receiptholder or Couponholder who is liable to such
taxes, duties, assessments or governmental charges in respect of such Note, Receipt or Coupon by reason of
his having some connection with the British Virgin Islands or the PRC other than the mere holding of the
Note, Receipt or Coupon; or
(b) Surrender More Than 30 Days after the Relevant Date: where the relevant Note or Coupon or Receipt is
presented or the relevant Certificate is presented (where presentation or surrender is required) for payment
more than 30 days after the Relevant Date except to the extent that the Noteholder, Receiptholder or
Couponholder would have been entitled to such Additional Tax Amounts on presenting it for payment on the
last day of such period of 30 days.
If the Issuer or the Guarantor becomes subject at any time to any taxing jurisdiction other than the British Virgin
Islands or the PRC respectively, references in these Conditions to the British Virgin Islands or the PRC shall be
construed as references to the British Virgin Islands or (as the case may be) the PRC and/or such other
jurisdiction.
“Relevant Date” in respect of any Note, Receipt or Coupon means the date on which payment in respect of it
first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which
payment in full of the amount outstanding is made or (if earlier) the date falling seven days after that on which
notice is duly given to the Noteholders that, upon further presentation or surrender of such Note (or the relevant
Certificate representing such Note), Receipt or Coupon being made in accordance with these Conditions, such
payment will be made, provided that payment is in fact made upon such surrender or presentation.
References in these Conditions to (i) “principal” shall be deemed to include any premium payable in respect of
the Notes, Final Redemption Amounts, Early Redemption Amounts, Early Redemption Amount (Change of
Control), Early Redemption Amount (No Registration Event), Optional Redemption Amounts, Amortised Face
Amounts and all other amounts in the nature of principal payable pursuant to Condition 6 or any amendment or
supplement to it, (ii) “interest” shall be deemed to include all Interest Amounts and all other amounts in the
nature of interest payable pursuant to Condition 5 or any amendment or supplement to it and (iii) “principal”
and/or “interest” shall be deemed to include any additional amounts that may be payable under this Condition
8 or any similar undertaking given in addition to or in substitution for it under the Trust Deed or the relevant
Deed of Guarantee.
Neither the Trustee nor any Agent shall in any event be responsible for paying any tax, duty, withholding,
assessment, governmental charge or other payment referred to in this Condition 8 or for determining whether
such amounts are payable or the amount thereof, and none of them shall be responsible or liable for any failure
by the Issuer, the Guarantor, any Noteholder, Receiptholder or Couponholder or any other person to pay such tax,
duty, withholding, assessment, governmental charge or other payment in any jurisdiction or be responsible to
provide any notice or information in relation to the Notes in connection with payment of such tax, duty,
withholding, assessment, governmental charge or other payment.
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9 EVENTS OF DEFAULT
If any of the following events (each an “Event of Default”) occurs, the Trustee at its discretion may, and if so
requested in writing by holders of at least 25 per cent. of the aggregate principal amount of the Notes then
outstanding or if so directed by an Extraordinary Resolution shall (provided in any such case that the Trustee
shall have been indemnified and/or secured and/or pre-funded to its satisfaction), give notice to the Issuer and
the Guarantor that the Notes are, and they shall immediately become, due and payable at their Early Redemption
Amount with accrued and unpaid interest:
(a) Non-Payment: there has been a failure to pay the principal or any premium (if any) of or interest on any
of the Notes when due and in the case of interest, such failure continues for a period of seven days; or
(b) Breach of Other Obligations: the Issuer or the Guarantor defaults in the performance or observance of any
of their other obligations under or in respect of the Notes or the Trust Deed or the relevant Deed of Guarantee
(other than those the breach of which would give rise to a right of redemption pursuant to Condition 6(d)),
and such default (i) is in the opinion of the Trustee incapable of remedy or, (ii) being a default which is in
the opinion of the Trustee capable of remedy, is not remedied for 30 days after the Trustee has given written
notice thereof to the Issuer or the Guarantor, as the case may be; or
(c) Cross-Acceleration:
(i) any Indebtedness for Borrowed Money of the Issuer, the Guarantor or any of their respective
Subsidiaries is not paid when due or (as the case may be) within any originally applicable grace period;
(ii) any such Indebtedness for Borrowed Money becomes due and payable prior to its stated maturity
otherwise than at the option of the Issuer, the Guarantor or (as the case may be) the relevant Subsidiary
or (provided that no event of default, howsoever described, has occurred) any person entitled to such
Indebtedness for Borrowed Money; or
(iii) the Issuer, the Guarantor or any of their respective Subsidiaries fails to pay when due any amount
payable by it under any guarantee of any Indebtedness for Borrowed Money;
provided that (A) the amount of Indebtedness for Borrowed Money referred to in (i) and/or (ii) above of this
Condition 9(c) and/or the amount payable under any guarantee referred to in (iii) above of this Condition 9(c)
individually or in the aggregate exceeds U.S.$100,000,000 (or its equivalent in any other currency or
currencies) and (B) such Indebtedness for Borrowed Money (other than any such Indebtedness for Borrowed
Money of the Issuer) has an original maturity of more than 365 days; or
(d) Unsatisfied Judgment: one or more judgment(s) or order(s) (for which no further appeal can be made) for
the payment of an aggregate amount in excess of U.S.$100,000,000 (or its equivalent in any other currency
or currencies) is rendered against the Issuer, the Guarantor or any of the Material Subsidiaries and
continue(s) unsatisfied and unstayed for a period of 60 days after the date(s) thereof or, if later, the date
therein specified for payment; or
(e) Security Enforced: an encumbrancer takes possession or an administrative or other receiver or an
administrator or other similar officer is appointed of the whole or any material part of the property, assets
or revenues of the Issuer, the Guarantor or any of the Material Subsidiaries and such appointment is not
discharged within 45 days; or
(f) Insolvency: the Issuer, the Guarantor or any of the Material Subsidiaries is (or is, or could be, deemed by
law or a court to be) insolvent or bankrupt or unable to pay its debts as and when such debts fall due, stops,
suspends or threatens to stop or suspend payment of all or a material part of its debts, proposes or makes
a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in
respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any
material part of the debts of the Issuer, the Guarantor or any of the Material Subsidiaries; or
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(g) Winding-up: an order of any court of competent jurisdiction is made or an effective resolution passed for
the winding-up or dissolution of the Issuer, the Guarantor or any of the Material Subsidiaries (except for a
members’ voluntary solvent winding-up of any of the Material Subsidiaries), or the Issuer, the Guarantor or
any of the Material Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business
or operations, except (i) for the purpose of and followed by a solvent winding-up, dissolution, reconstruction,
amalgamation, reorganisation, merger or consolidation (A) on terms approved by an Extraordinary
Resolution of the Noteholders, or (B) in the case of any of the Material Subsidiaries, whereby the
undertaking and assets of such Material Subsidiary are transferred to or continue to be otherwise vested in
the Issuer, Guarantor or their respective Subsidiaries and (ii) for the disposal of any assets on an arm’s length
basis where all of the undertaking and assets resulting from such disposal are vested in the Issuer, the
Guarantor and/or their respective Subsidiaries provided such disposal does not result in the Guarantor
becoming a cash company; or
(h) Nationalisation: any step is taken by any person with a view to the seizure, compulsory acquisition or
expropriation of all or a substantial part of the assets of the Issuer, the Guarantor or any of the Material
Subsidiaries provided that the value of the assets subject to such seizure, compulsory acquisition or
expropriation, individually or in the aggregate, exceeds 50 per cent. of the total assets of the Guarantor and
its Subsidiaries (taken together, the “Group”); or
(i) Authorisation and Consents: any action, condition or thing (including the obtaining or effecting of any
necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any
time required to be taken, fulfilled or done in order (i) to enable the Issuer and the Guarantor to lawfully enter
into, exercise their respective rights and perform and comply with their respective obligations under the
Notes, the Trust Deed and the Deed of Guarantee, (ii) to ensure that those obligations are legally binding and
enforceable and (iii) to make the Notes, the Trust Deed and the Deed of Guarantee admissible in evidence
in the courts of Hong Kong is not taken, fulfilled or done; or
(j) Illegality: it is or will become unlawful for the Issuer or the Guarantor to perform or comply with any one
or more of their respective obligations under any of the Notes, the relevant Deed of Guarantee, the Coupons,
the Receipts or the Trust Deed; or
(k) Guarantee: the relevant Guarantee is not (or is claimed by the Guarantor not to be) in full force and effect,
or the relevant Guarantee is modified, amended or terminated other than strictly in accordance with its terms
or these Conditions; or
(l) Analogous Events: any event occurs which under the laws of any relevant jurisdictions has an analogous
effect to any of the events referred to in any of Conditions 9(d) to 9(g) (both inclusive).
In this Condition 9:
“Indebtedness for Borrowed Money” means any indebtedness (whether being principal, premium, interest or
other amounts) for or in respect of any borrowed money or any liability under or in respect of any notes, bonds,
debentures, debenture stock, loan stock or other securities; and
“Material Subsidiary” means any Subsidiary of the Guarantor whose total amount of gross assets or revenue
(excluding intra-group items) represents 5 per cent. or more of the gross assets or revenue of the Group calculated
on a consolidated basis, as determined by reference to the latest audited consolidated financial statements of that
Subsidiary (consolidated in the case of a Subsidiary which itself has Subsidiaries) and the latest audited
consolidated financial statements of the Group. A certificate in English signed by an Authorised Signatory of the
Guarantor confirming that a Subsidiary is or is not, or was or was not, a Material Subsidiary shall, in the absence
of manifest error, be conclusive and binding on all parties.
10 PRESCRIPTION
Claims against the Issuer and/or the Guarantor for payment in respect of the Notes, Receipts and Coupons
(which, for this purpose, shall not include Talons) shall be prescribed and become void unless made within 10
years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect
of them.
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11 REPLACEMENT OF NOTES, CERTIFICATES, RECEIPTS, COUPONS AND TALONS
If a Note, Certificate, Receipt, Coupon or Talon is mutilated or defaced or is alleged to have been lost, stolen,
mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations or other relevant
regulatory authority regulations, at the specified office of the Issuing and Paying Agent (in the case of Bearer
Notes, Receipts, Coupons or Talons) and of the Registrar (in the case of Certificates) or such other Paying Agent
or Transfer Agent from time to time designated by the Issuer for that purpose and notice of whose designation
is given to Noteholders, in each case on payment by the claimant of the fees and costs incurred in connection
therewith and on such terms as to evidence, security, indemnity (which may provide, inter alia, that if the
allegedly lost, stolen or destroyed Note, Certificate, Receipt, Coupon or Talon is subsequently presented for
payment or, as the case may be, for exchange for further Coupons, there shall be paid to the Issuer on demand
the amount payable by the Issuer, the Issuing and Paying Agent and/or the Registrar in respect of such Notes,
Certificates, Receipts, Coupons or further Coupons), pre-funding and otherwise as the Issuer or the relevant
Agent may require. Mutilated or defaced Notes, Certificates, Receipts, Coupons or Talons must be surrendered
before replacements will be issued.
12 MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER
(a) Meetings of Noteholders: The Trust Deed contains provisions for convening meetings of Noteholders to
consider matters affecting their interests, including without limitation the sanctioning by Extraordinary
Resolution (as defined in the Trust Deed) of a modification of any of these Conditions or any provisions of
the Trust Deed, the Agency Agreement or the relevant Deed of Guarantee. Such a meeting may be convened
by the Issuer, the Guarantor or the Trustee and shall be convened by the Trustee if so requested in writing
by the Noteholders holding not less than 10 per cent. in aggregate principal amount of the Notes for the time
being outstanding and subject to the Trustee being indemnified and/or secured and/or pre-funded to its
satisfaction against all costs and expenses. The quorum for any meeting convened to consider an
Extraordinary Resolution will be two or more persons holding or representing more than 50 per cent. in
aggregate principal amount of the Notes for the time being outstanding, or at any adjourned meeting two or
more persons being or representing Noteholders whatever the principal amount of the Notes held or
represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to amend
the dates of maturity or redemption of the Notes, any Instalment Date or any date for payment of interest
or Interest Amounts on the Notes, (ii) to reduce or cancel the principal amount of, or any Instalment Amount
of, or any Early Redemption Amount, Early Redemption Amount (Change of Control), Early Redemption
Amount (No Registration Event) or Optional Redemption Amount in respect of, or any premium payable in
respect of, or interest, on redemption of, the Notes, (iii) to reduce the rate or rates of interest in respect of
the Notes or to vary the method or basis of calculating the rate or rates or amount of interest or the basis
for calculating any Interest Amount in respect of the Notes, (iv) if a Minimum and/or a Maximum Rate of
Interest or Redemption Amount is shown hereon, to reduce any such Minimum and/or Maximum, (v) to vary
any method of, or basis for, calculating the Final Redemption Amount, the Early Redemption Amount, the
Early Redemption Amount (Change of Control), the Early Redemption Amount (No Registration Event) or
the Optional Redemption Amount, including the method of calculating the Amortised Face Amount, (vi) to
vary the currency or currencies of payment or denomination of the Notes, or (vii) to modify the provisions
concerning the quorum required at any meeting of Noteholders or the majority required to pass an
Extraordinary Resolution, or (viii) to modify or cancel the relevant Deed of Guarantee (other than as
provided in Condition 12(b) or the Relevant Deed of Guarantee), in which case the necessary quorum will
be two or more persons holding or representing not less than 75 per cent., or at any adjourned meeting not
less than 25 per cent., in aggregate principal amount of the Notes for the time being outstanding. Any
Extraordinary Resolution duly passed shall be binding on Noteholders (whether or not they were present at
the meeting at which such resolution was passed) and on all Couponholders.
The Trust Deed provides that a resolution (A) in writing signed by or on behalf of the holders of not less
than 90 per cent. in aggregate principal amount of the Notes for the time being outstanding or (B) passed
by Electronic Consent (as defined in the Trust Deed), shall for all purposes be as valid and effective as an
Extraordinary Resolution passed at a meeting of Noteholders duly convened and held. Such a resolution in
writing may be contained in one document or several documents in the same form, each signed by or on
behalf of one or more Noteholders. A resolution passed in writing or by Electronic Consent will be binding
on all Noteholders whether or not they participated in such written resolution or Electronic Consent.
The Conditions may be amended, modified or varied in relation to any Series of Notes by the terms of the
relevant Pricing Supplement in relation to such Series.
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(b) Modification of Agreements and Deeds: The Trustee may (but shall not be obliged to) agree (and is entitled
to rely on external opinions for this purpose), without the consent of the Noteholders, Receiptholders or
Couponholders, to (i) any modification of these Conditions or any of the provisions of the Trust Deed, the
Agency Agreement or the relevant Deed of Guarantee that is, in its opinion, of a formal, minor or technical
nature or made to correct a manifest error or to comply with any mandatory provision of law, and (ii) any
other modification (except as mentioned in the Trust Deed or the relevant Deed of Guarantee), and any
waiver or authorisation of any breach or proposed breach by the Issuer or the Guarantor, of these Conditions
or any of the provisions of the Trust Deed, the Agency Agreement or the relevant Deed of Guarantee that
is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. Any such
modification, authorisation or waiver shall be binding on the Noteholders, Receiptholders and the
Couponholders and, unless the Trustee otherwise agrees, such modification, authorisation or waiver shall be
notified by the Issuer, failing whom, the Guarantor, to the Noteholders as soon as practicable in accordance
with Condition 16. The Trustee may request and rely conclusively upon a certificate signed by an Authorised
Signatory of the Guarantor and/or an opinion of counsel concerning the compliance with the above
conditions in respect of any modification and/or amendment.
(c) Directions from Noteholders: Notwithstanding anything to the contrary in these Conditions, the Trust Deed,
the relevant Deed of Guarantee or the Agency Agreement, whenever the Trustee is required or entitled by
the terms of these Conditions, the Trust Deed, the relevant Deed of Guarantee or the Agency Agreement to
exercise any discretion or power, take any action, make any decision or give any direction or certification,
the Trustee is entitled, prior to exercising any such discretion or power, taking any such action, making any
such decision, or giving any such direction or certification, to seek directions from the Noteholders by way
of an Extraordinary Resolution and to have been indemnified and/or secured and/or pre-funded to its
satisfaction against all action, proceedings, claims and demands to which it may be or become liable and all
costs, charges, damages, expenses (including legal expenses) and liabilities which may be incurred by it in
connection therewith, and the Trustee is not responsible for any loss or liability incurred by any person as
a result of any delay in it exercising such discretion or power, taking such action, making such decision, or
giving such direction or certification where the Trustee is seeking such directions or in the event that no such
directions are received.
(d) Entitlement of the Trustee: In connection with the exercise of its functions, rights, powers and/or
discretions (including but not limited to those referred to in this Condition 12), the Trustee shall have regard
to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise
for individual Noteholders, Receiptholders or Couponholders, and the Trustee shall not be entitled to require
on behalf of any Noteholder, Receiptholder or Couponholder, nor shall any Noteholder, Receiptholder or
Couponholder be entitled to claim, from the Issuer, the Guarantor or the Trustee (as the case may be), any
indemnification or payment in respect of any tax consequence of any such exercise upon individual
Noteholders, Receiptholder or Couponholders.
13 FURTHER ISSUES
The Issuer may from time to time without the consent of the Noteholders, Receiptholders or Couponholders
create and issue further securities having the same terms and conditions as the Notes in all respects (or in all
respects except for the Issue Date, the first payment of interest on them and the timing for submission of the
NDRC Post-issue Filing and other NDRC Filings (if applicable) and for complying with the Registration
Condition and for the completion of the Cross-Border Security Registration and the giving of consequential
notices thereof) and so that such further issue shall be consolidated and form a single series with the outstanding
Notes. References in these Conditions to the Notes include (unless the context requires otherwise) any other
securities issued pursuant to this Condition 13. However, such further securities may only be issued if such
supplemental documents are executed and further opinions are obtained as the Trustee may require, as further set
out in the Trust Deed and such further securities shall be guaranteed by the Guarantor pursuant to a deed
supplemental to the relevant Deed of Guarantee.
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14 ENFORCEMENT
At any time after the Notes become due and payable, the Trustee may (but shall not be obliged to), at its
discretion and without further notice, take such steps and/or actions and/or institute such proceedings against the
Issuer and/or the Guarantor as it may think fit to enforce the terms of the Trust Deed, the Notes, the Receipts,
the Coupons and/or the relevant Deed of Guarantee, but it need not take any such steps and/or actions and/or
institute any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so
requested in writing by Noteholders holding at least 25 per cent. in aggregate principal amount of the Notes then
outstanding, and (b) it shall first have been indemnified and/or secured and/or pre-funded to its satisfaction. No
Noteholder, Receiptholder and/or Couponholder may proceed directly against the Issuer or the Guarantor unless
the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is
continuing.
15 INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility.
Under the Trust Deed, the Trustee is entitled to be indemnified, secured and/or pre-funded to its satisfaction and
to be relieved from responsibility in certain circumstances including without limitation, provisions relieving it
from taking steps and/or actions and/or instituting proceedings to enforce its rights under the Trust Deed, the
Agency Agreement, the relevant Deed of Guarantee and/or these Conditions and in respect of the Notes, the
Receipts and the Coupons and payment or taking other actions unless first indemnified and/or secured and/or
pre-funded to its satisfaction and to be paid or reimbursed for any fees, costs, expenses and indemnity payments
and for liabilities incurred by it in priority to the claims of Noteholders, Receiptholders and/or Couponholders.
The Trustee is entitled to enter into business transactions with the Issuer, the Guarantor, any Subsidiary of the
Issuer or the Guarantor and any other entity related (directly or indirectly) to the Issuer or the Guarantor without
accounting for any profit, and (i) to act as trustee for the Noteholders of any other securities issued by or relating
to, the Issuer, the Guarantor and/or any entity related to the Issuer or the Guarantor, (ii) to exercise and enforce
its rights, powers and discretions, comply with its obligations and perform its duties under or in relation to any
such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences
for, the Noteholders and (iii) to retain and not be liable to account for any profit made or any other person amount
or benefit received thereby or in connection therewith.
The Trustee and the Agents may rely without liability to Noteholders, Receiptholders and/or Couponholders, the
Issuer, the Guarantor or any other person on any report, confirmation, information or certificate from or any
opinion or advice of any lawyer, legal adviser, accountant, auditor, valuer, auctioneer, surveyor, broker, financial
adviser, financial institution or any other expert, whether or not addressed to it and whether their liability in
relation thereto is limited (by its terms or by any engagement letter relating thereto or in any other manner) by
reference to a monetary cap, methodology or otherwise. The Trustee and the Agents may accept and shall be
entitled to rely conclusively without liability on any such report, confirmation, certificate, information, opinion
or advice, in which event such report, confirmation, certificate, information, opinion or advice shall be binding
on the Issuer, the Guarantor and the Noteholders, Receiptholders and/or Couponholders. The Trustee and the
Agents shall not be responsible or liable to the Issuer, the Guarantor and the Noteholders or any other person for
any loss occasioned by acting on or refraining from acting on any such report, information, confirmation,
certificate, opinion or advice.
Neither the Trustee nor any of the Agents shall have any obligation to monitor compliance with the provisions
of the Trust Deed, the Agency Agreement, the relevant Deed of Guarantee or these Conditions or to monitor or
take any steps to ascertain whether an Event of Default or a Potential Event of Default or a Relevant Event has
occurred, and none of them shall be responsible or liable to the Issuer, the Guarantor, the Noteholders,
Receiptholders, Couponholders or any other person for not doing so.
None of the Trustee or any of the Agents shall be responsible for the performance by the Issuer, the Guarantor
and any other person appointed by the Issuer and/or the Guarantor in relation to the Notes of the duties and
obligations on their part expressed in respect of the same in these Conditions or under the Trust Deed, the Agency
Agreement and/or the relevant Deed of Guarantee and, unless it has written notice from the Issuer or the
Guarantor to the contrary, the Trustee and each Agent shall be entitled to assume that the same are being duly
performed. None of the Trustee or any Agent shall be liable to any Noteholder, the Receiptholder, the
Couponholder, the Issuer, the Guarantor or any other person for any action taken by the Trustee or such Agent
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in accordance with the instructions of the Noteholders. The Trustee shall be entitled to rely on any direction,
request or resolution given by Noteholders holding the requisite principal amount of Notes outstanding or passed
at a meeting of Noteholders convened and held in accordance with the Trust Deed.
Whenever the Trustee is required or entitled by the terms of the Trust Deed, the Agency Agreement, the Deed
of Guarantee or these Conditions to exercise any discretion or power, take or refrain from taking any action, make
any decision or give any direction, the Trustee is entitled, prior to its exercising any such discretion or power,
taking or refraining from taking any such action, making any such decision, or giving any such direction, or
clarification of any directions, to seek directions from the Noteholders by way of an Extraordinary Resolution
or given as otherwise contemplated or permitted by the Trust Deed and/or the Notes, and shall have been
indemnified and/or secured and/or pre-funded to its satisfaction against all action, proceedings, claims and
demands to which it may be or become liable and all costs, charges, damages, expenses (including but not limited
to legal expenses) and liabilities which may be incurred by it in connection therewith, and the Trustee shall not
be responsible or liable for any loss or liability incurred by the Issuer, the Guarantor, the Noteholders or any other
person as a result of any delay in it exercising such discretion or power, taking or refraining from such action,
making such decision, or giving such direction as a result of seeking such direction where the Trustee is seeking
such directions from Noteholders or in the event that no such directions are received by the Trustee, or as a result
of any action taken by it in accordance with the approval, directions or instructions of the Noteholders.
Each Noteholder shall be solely responsible for making and continuing to make its own independent appraisal
and investigation into the financial condition, creditworthiness, condition, affairs, status and nature of the Issuer,
the Guarantor and their respective Subsidiaries, and the Trustee shall not at any time have any responsibility for
the same and each Noteholder shall not rely on the Trustee in respect thereof.
16 NOTICES
Notices required to be given to the holders of Registered Notes pursuant to these Conditions shall be in English
and mailed to them at their respective addresses in the Register and deemed to have been given on the fourth
weekday (being a day other than a Saturday, Sunday or public holiday) after the date of mailing. Notices required
to be given to the holders of Bearer Notes pursuant to these Conditions shall be valid if published in a daily
newspaper of general circulation in Asia (which is expected to be the Asian Wall Street Journal). If any such
publication is not practicable, notices required to be given pursuant to these Conditions shall be validly given
if published in another leading daily English language newspaper with general circulation in Asia. The Issuer
shall also ensure that notices are duly published in a manner that complies with the rules and regulations of any
stock exchange or other relevant authority on which the Notes are for the time being listed. Any such notice shall
be deemed to have been given on the date of such publication or, if published more than once or on different
dates, on the first date on which such publication is made.
Receiptholders and Couponholders shall be deemed for all purposes to have notice of the contents of any notice
given to the holders of Bearer Notes in accordance with this Condition 16.
So long as the Notes are represented by a Global Note or a Global Certificate and such Global Note or Global
Certificate is held on behalf of Euroclear or Clearstream, the CMU or any other clearing system, notices to the
holders of Notes of that Series may be given by delivery of the relevant notice to that clearing system for
communication by it to entitled accountholders in substitution for notification as required by the Conditions.
17 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
Save as contemplated in Condition 14, no person shall have any right to enforce any term or condition of the
Notes under the Contracts (Rights of Third Parties) Act 1999 but this shall not affect any right or remedy which
exists or is available apart from such Act.
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18 GOVERNING LAW AND JURISDICTION
(a) Governing Law: The Notes, the Receipts, the Coupons, the Talons, the relevant Deed of Guarantee, the
Agency Agreement and the Trust Deed and any non-contractual obligations arising out of or in connection
with them, are governed by and shall be construed in accordance with English law.
(b) Jurisdiction: The courts of Hong Kong are to have exclusive jurisdiction to settle any disputes which may
arise out of or in connection with the Notes, the Receipts, the Coupons, the Talons, the relevant Deed of
Guarantee, the Agency Agreement or the Trust Deed and accordingly any legal action or proceedings arising
out of or in connection with the Notes, the Receipts, the Coupons, the Talons, the relevant Deed of
Guarantee, the Agency Agreement or the Trust Deed (“Proceedings”) may be brought in such courts.
Pursuant to the Trust Deed, each of the Issuer and the Guarantor has irrevocably submitted to the exclusive
jurisdiction of such courts and has waived any objection to Proceedings in any such courts whether on the
ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum.
(c) Service of Process: Each of the Issuer and the Guarantor agrees to receive service of process at Haitong
International Holdings Limited ( )’s registered address (currently at Hong Kong at
22/F, Li Po Chun Chambers, 189 Des Voeux Road Central, Central, Hong Kong) in any Proceedings in Hong
Kong based on any of the Notes, the Receipts, the Coupons, the Talons, the relevant Deed of Guarantee, the
Agency Agreement or the Trust Deed. Such service shall be deemed completed on delivery to such process
agent (whether or not it is forwarded to and received by the Issuer). If for any reason such agent ceases to
have such a principal place of business in Hong Kong, each of the Issuer and the Guarantor will promptly
appoint a substitute process agent and notify the Trustee and the Agents of such appointment within 30 days
of such cessation. Nothing herein shall affect the right to serve process in any other manner permitted by law.
(d) Waiver of Immunity: Each of the Issuer and the Guarantor has waived any right to claim sovereign or other
immunity from jurisdiction or execution and any similar defence, and has irrevocably consented to the giving
of any relief or the issue of any process, including, without limitation, the making, enforcement or execution
against any property whatsoever (irrespective of its use or intended use) of any order or judgment made or
given in connection with any Proceedings.
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SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM
Terms used in this section that are not otherwise defined shall have the meanings given to them in “Terms and
Conditions of the Notes”.
INITIAL ISSUE OF NOTES
Global Notes and Global Certificates may be delivered on or prior to the original issue date of the Tranche to
a common depositary for Euroclear and Clearstream (the “Common Depositary”) or a sub-custodian for the
HKMA as operator of the CMU.
Upon the initial deposit of a Global Note or a Global Certificate with the Common Depositary or with a
sub-custodian for the HKMA as operator of the CMU or registration of Registered Notes in the name of (i) any
nominee of the Common Depositary for Euroclear and Clearstream or (ii) the HKMA as operator of the CMU
and delivery of the relevant Global Note or Global Certificate to the Common Depositary or the sub-custodian
for the HKMA as operator of the CMU (as the case may be), Euroclear or Clearstream or the CMU (as the case
may be) will credit each subscriber with a principal amount of Notes equal to the principal amount thereof for
which it has subscribed and paid.
Notes that are initially deposited with the Common Depositary may also be credited to the accounts of
subscribers with (if indicated in the relevant Pricing Supplement) other clearing systems through direct or
indirect accounts with Euroclear and Clearstream held by such other clearing systems. Conversely, Notes that are
initially deposited with any other clearing system may similarly be credited to the accounts of subscribers with
Euroclear, Clearstream or other clearing systems.
RELATIONSHIP OF ACCOUNTHOLDERS WITH CLEARING SYSTEMS
Save as provided in the following paragraph, each of the persons shown in the records of Euroclear, Clearstream
or any other clearing system (an “Alternative Clearing System”) as the holder of a Note represented by a Global
Note or a Global Certificate must look solely to Euroclear, Clearstream or any such Alternative Clearing System
(as the case may be) for his share of each payment made by the Issuer or the Guarantor to the bearer of such
Global Note or the holder of the underlying Registered Notes, as the case may be, and in relation to all other
rights arising under the Global Notes or Global Certificates, subject to and in accordance with the respective
rules and procedures of Euroclear, Clearstream or such Alternative Clearing System (as the case may be). Such
persons shall have no claim directly against the Issuer or the Guarantor in respect of payments due on the Notes
for so long as the Notes are represented by such Global Note or Global Certificate and such obligations of the
Issuer or the Guarantor will be discharged by payment to the bearer of such Global Note or the holder of the
underlying Registered Notes, as the case may be, in respect of each amount so paid.
If a Global Note or a Global Certificate is lodged with a sub-custodian for or registered with the CMU, the
person(s) for whose account(s) interests in such Global Note or Global Certificate are credited as being held in
the CMU in accordance with the CMU Rules shall be the only person(s) entitled (or, in the case of Registered
Notes, directed or deemed by the CMU as entitled) to receive payments in respect of Notes represented by such
Global Note or Global Certificate and the Issuer or the Guarantor will be discharged by payment to, or to the
order of, such person(s) for whose account(s) interests in such Global Note or Global Certificate are credited as
being held in the CMU in respect of each amount so paid. Each of the persons shown in the records of the CMU
as the beneficial holder of a particular principal amount of Notes represented by such Global Note or Global
Certificate must look solely to the CMU for his share of each payment so made by the Issuer in respect of such
Global Note or Global Certificate.
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EXCHANGE
Temporary Global Notes
Each temporary Global Note will be exchangeable (free of charge to the holder) on or after its Exchange Date:
(i) if the relevant Pricing Supplement indicates that such Global Note is issued in compliance with TEFRA C
or in a transaction to which TEFRA is not applicable (as to which, see “Summary of the Programme – Selling
Restrictions”), in whole, but not in part, for the Definitive Notes defined and described below; and
(ii) otherwise, in whole or in part upon certification as to non-U.S. beneficial ownership in the form set out in
the Agency Agreement for interests in a permanent Global Note or, if so provided in the relevant Pricing
Supplement, for Definitive Notes.
The CMU may require that any such exchange for a permanent Global Note is made in whole and not in part and
in such event, no such exchange will be effected until all relevant account holders (as set out in a CMU Issue
Position Report (as defined in the rules of the CMU) or any other relevant notification supplied to the CMU
Lodging and Paying Agent by the CMU) have so certified.
The holder of a temporary Global Note issued pursuant to TEFRA D will not be entitled to collect any payment
of interest, principal or other amount due on or after the Exchange Date unless, upon due certification as to
non-U.S. beneficial ownership in the form set out in the Agency Agreement, exchange of the temporary Global
Note for an interest in a permanent Global Note or for Definitive Notes is improperly withheld or refused. The
payments in respect of a Note issued under TEFRA D pursuant to Condition 6(d) (Redemption for Relevant
Events) or 6(f) (Redemption at the Option of Noteholders (Put Option)) may not be collected without certificate
as to non-U.S. beneficial ownership.
In respect of a Note issued under TEFRA D, for the purpose of dealing in Euroclear or Clearstream or the CMU,
any further issue of Notes by the Issuer pursuant to Condition 13 (Further Issues) may not be consolidated and
form a single series with the outstanding securities of any series (including the Notes) until the exchange of
interests in a temporary Global Note for interests in a permanent Global Note upon the relevant Certification.
Permanent Global Notes
Each permanent Global Note will be exchangeable (free of charge to the holder) on or after its Exchange Date
in whole but not, except as provided in the paragraph titled “Partial Exchange of Permanent Global Notes”
below, in part for Definitive Notes if the permanent Global Note is held on behalf of Euroclear, Clearstream, the
CMU or an Alternative Clearing System and any such clearing system is closed for business for a continuous
period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention
permanently to cease business or does in fact do so.
In the event that a Global Note is exchanged for Definitive Notes, such Definitive Notes shall be issued in
Specified Denomination(s) only. A Noteholder who holds a principal amount of less than the minimum Specified
Denomination will not receive a Definitive Note in respect of such holding and would need to purchase a
principal amount of Notes such that it holds an aggregate principal amount equal to one or more Specified
Denominations.
Global Certificates
The following will apply in respect of transfers of Notes held in Euroclear, Clearstream, the CMU or an
Alternative Clearing System. These provisions will not prevent the trading of interests in the Notes within a
clearing system whilst they are held on behalf of such clearing system, but will limit the circumstances in which
the Notes may be withdrawn from the relevant clearing system. Transfer of the holding of Notes represented by
any Global Certificate pursuant to Condition 2(b) (Transfer of Registered Notes) may only be made in part if the
relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of
holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so.
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In the event that a Global Certificate is exchanged for a definitive Certificate, such definitive Certificate shall
be issued in Specified Denomination(s) only. A Noteholder who holds a principal amount of less than the
minimum Specified Denomination will not receive a definitive Certificate in respect of such holding and would
need to purchase a principal amount of Notes such that it holds an aggregated principal amount equal to one or
more Specified Denominations.
Partial Exchange of Permanent Global Notes
For so long as a permanent Global Note is held on behalf of a clearing system and the rules of that clearing
system permit, such permanent Global Note will be exchangeable in part on one or more occasions for Definitive
Notes if so provided in, and in accordance with, the Terms and Conditions of the Notes (which will be set out
in the relevant Pricing Supplement) relating to Partly Paid Notes.
Delivery of Notes
On or after any due date for exchange, the holder of a Global Note may surrender such Global Note or, in the
case of a partial exchange, present it for endorsement to or to the order of the Issuing and Paying Agent (or, in
the case of Notes lodged with the CMU, the CMU Lodging and Paying Agent).
In exchange for any Global Note, or the part thereof to be exchanged, the Issuer will (i) in the case of a temporary
Global Note exchangeable for a permanent Global Note, deliver, or procure the delivery of, a permanent Global
Note in an aggregate principal amount equal to that of the whole or that part of a temporary Global Note that
is being exchanged or, in the case of a subsequent exchange, endorse, or procure the endorsement of, a permanent
Global Note to reflect such exchange or (ii) in the case of a Global Note exchangeable for Definitive Notes,
deliver, or procure the delivery of, an equal aggregate principal amount of duly executed and authenticated
Definitive Notes. Global Notes, Global Certificates and Definitive Notes will be delivered outside the United
States and its possessions. In this Offering Circular, “Definitive Notes” means, in relation to any Global Note,
the definitive Bearer Notes for which such Global Note may be exchanged (if appropriate, having attached to
them all Coupons (and, where appropriate, Talons) in respect of interest or/and Receipts in respect of Instalment
Amounts that have not already been paid on the Global Note).
Definitive Notes will be security printed in accordance with any applicable legal and stock exchange
requirements substantially in the form set out in the Schedules to the Trust Deed. On exchange in full of each
permanent Global Note, the Issuer will, if the holder so requests, procure that it is cancelled and returned to the
holder together with the relevant Definitive Notes.
Exchange Date
“Exchange Date” means, in relation to a temporary Global Note, the first day following the expiry of 40 days
after its issue date and, in relation to a permanent Global Note, a day falling not less than 60 days after that on
which the notice requiring exchange is given and on which banks are open for business in the city in which the
specified office of the Issuing and Paying Agent (or, in the case of Notes lodged with the CMU, the CMU
Lodging and Paying Agent) located, except in the case of exchange as mentioned above, in the cities in which
Euroclear and Clearstream (or, in the case of Notes lodged with the CMU, the CMU) and (if relevant) in the city
in which the Alternative Clearing System are located.
Amendment to the Terms and Conditions of the Notes
The temporary Global Notes, permanent Global Notes and Global Certificates contain provisions that apply to
the Notes that they represent, some of which modify the effect of the Terms and Conditions of the Notes set out
in this Offering Circular. The following is a summary of certain of those provisions:
Payments
No payment falling due after the Exchange Date will be made on any Global Note unless exchange for an interest
in a permanent Global Note or for Definitive Notes is improperly withheld or refused.
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Payments on any temporary Global Note issued in compliance with TEFRA D before the Exchange Date will only
be made against presentation of certification as to non-U.S. beneficial ownership in the form set out in the
Agency Agreement. All payments in respect of Notes represented by a Global Note (except with respect to a
Global Note held through the CMU) will be made against presentation for endorsement and, if no further
payment falls to be made in respect of the Notes, surrender of that Global Note. A record of each payment so
made will be enfaced on each Global Note, which endorsement will be prima facie evidence that such payment
has been made in respect of the Notes. For the purpose of any payments made in respect of a Global Note, the
relevant place of presentation (if applicable) shall be disregarded in the definition of “Payment Business Day”
set out in Condition 7(h) (Non-Payment Business Days) of the Terms and Conditions of the Notes but (in the case
of Notes lodged with the CMU) shall also require such day to be a day (other than a Saturday, Sunday or public
holiday) on which the CMU is operating.
All payments in respect of Notes represented by a Global Certificate (other than a Global Certificate representing
Notes held through the CMU) will be made to, or to the order of, the person whose name is entered on the
Register at the close of business on the record date which shall be the Clearing System Business Day immediately
prior to the date for payment, where for the purposes of this paragraph, “Clearing System Business Day” means
Monday to Friday inclusive except 25 December and 1 January.
In respect of a Global Note or Global Certificate representing Notes held through the CMU, any payments of
principal, interest (if any) or any other amounts shall be made to the person(s) for whose account(s) interests in
the relevant Global Note or Global Certificate are credited (as set out in the records of the CMU) at the close
of business on the Clearing System Business Day immediately prior to the date for payment and, save in the case
of final payment, no presentation of the relevant bearer Global Note or Global Certificate shall be required for
such purpose. For the purposes of this paragraph, “Clearing System Business Day” means a day on which the
CMU is operating and open for business.
Prescription
Claims in respect of principal and interest in respect of Notes that are represented by a permanent Global Note
will become void unless it is presented for payment within a period of 10 years (in the case of principal) and 5
years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 8 (Taxation) of the
Terms and Conditions of the Notes).
Meetings
The holder of the Notes represented by a permanent Global Note or a Global Certificate shall (unless the
permanent Global Note or the Global Certificate represents only one Note) be treated as two persons for the
purposes of any quorum requirements of a meeting of Noteholders and, at any such meeting, the holder of the
Notes represented by a permanent Global Note or a Global Certificate shall be treated as having one vote in
respect of each integral currency unit of the Specified Currency of the Notes.
Cancellation
Cancellation of any Note represented by a permanent Global Note that is required by the Terms and Conditions
of the Notes to be cancelled (other than upon its redemption) shall be effected by reduction in the principal
amount of the relevant permanent Global Note representing such Note on its presentation to or to the order of
the Issuing and Paying Agent (or, in the case of Notes lodged with the CMU, the CMU Lodging and Paying
Agent) for endorsement in the relevant schedule of such permanent Global Note, whereupon the principal amount
thereof shall be reduced for all purposes by the amount so cancelled and endorsed.
Purchase
Notes represented by a permanent Global Note may only be purchased by the Issuer, the Guarantor or any of their
respective Subsidiaries if they are purchased together with the right to receive all future payments of interest and
Instalment Amounts (if any) thereon.
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Issuer’s Option
Any option of the Issuer provided for in the Terms and Conditions of the Notes of any Notes while such Notes
are represented by a permanent Global Note or by a Global Certificate shall be exercised by the Issuer giving
notice to the Noteholders within the time limits set out in and containing the information required by the Terms
and Conditions of the Notes, except that the notice shall not be required to contain the serial numbers of Notes
drawn in the case of a partial exercise of an option and accordingly no drawing of Notes shall be required. In
the event of a partial redemption of Notes, the rights of accountholders with a clearing system in respect of the
Notes will be governed by the standard procedures of Euroclear, Clearstream, the CMU or Alternative Clearing
System (as the case may be).
Noteholders’ Options
Any option of the Noteholders provided for in the Terms and Conditions of the Notes of any Notes while such
Notes are represented by a permanent Global Note or a Global Certificate may be exercised by the holder of the
permanent Global Note or the Global Certificate giving notice to the Issuing and Paying Agent (or, in the case
of Notes lodged with the CMU, the CMU Lodging and Paying Agent) (i) (in the case of the permanent Global
Note) within the time limits relating to the deposit of Notes with a Paying Agent set out in the Terms and
Conditions of the Notes substantially in the form of the notice available from any Paying Agent, except that the
notice shall not be required to contain the certificate numbers of the Notes in respect of which the option has been
exercised, and stating the principal amount of Notes in respect of which the option is exercised and at the same
time presenting the permanent Global Note to the Issuing and Paying Agent (or, in the case of Notes lodged with
the CMU, the CMU Lodging and Paying Agent), or to a Paying Agent acting on behalf of the Issuing and Paying
Agent (or, in the case of Notes lodged with the CMU, the CMU Lodging and Paying Agent), for notation
accordingly in the relevant schedule of such permanent Global Note or (ii) (in the case of the Global Certificate)
within the time limits set out in the Terms and Conditions of the Notes substantially in the form of the notice
available from any Paying Agent, except that the notice shall not be required to contain the certificate numbers
of the Notes in respect of which the option has been exercised, and stating the principal amount of Notes in
respect of which the option is exercised.
Notices
Notices required to be given in respect of the Notes represented by a Global Note or Global Certificate may be
given by their being delivered, (i) except as provided in (ii) below (so long as the Global Note or Global
Certificate is held on behalf of Euroclear, Clearstream or any other clearing system) to Euroclear, Clearstream
or such other clearing system, as the case may be, rather than by (in the case of a Global Note) notification as
required by the Terms and Conditions of the Notes or (in the case of a Global Certificate) mailing to the addresses
in the Register as required by the Terms and Conditions of the Notes or (ii) (so long as the Global Certificate
is held on behalf of the CMU) to the CMU, rather than by (in the case of a Global Note) notification as required
by the Terms and Conditions of the Notes or (in the case of a Global Certificate) mailing to the addresses in the
Register as required by the Terms and Conditions of the Notes, and any such notice shall be deemed to have been
given to the Noteholders on the day on which such notice is delivered to the CMU.
Calculation of Interest
So long as the Notes are represented by a Global Note or a Global Certificate and the Global Note or the Global
Certificate is held on behalf of Euroclear, Clearstream, the CMU or Alternative Clearing System (as the case may
be), the Issuer has promised, inter alia, to pay interest in respect of such Notes in accordance with the method
of calculation provided for in the Terms and Conditions of the Notes, save that the calculation is made in respect
of the total aggregate amount of the Notes represented by a Global Note or a Global Certificate.
PARTLY PAID NOTES
The provisions relating to Partly Paid Notes are not set out in this Offering Circular, but will be contained in the
relevant Pricing Supplement and thereby in the Global Notes. While any instalments of the subscription moneys
due from the holder of Partly Paid Notes are overdue, no interest in a Global Note representing such Notes may
be exchanged for an interest in a permanent Global Note or for Definitive Notes (as the case may be). If any
Noteholder fails to pay any instalment due on any Partly Paid Notes within the time specified, the Issuer may
forfeit such Notes and shall have no further obligation to their holder in respect of them.
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FORM OF PRICING SUPPLEMENT
The Pricing Supplement that will be issued in respect of each Tranche will be substantially in the following form,
duly supplemented (if necessary), amended (if necessary) and completed to reflect the particular terms of the
relevant Notes and their issue.
[MiFID II product governance/Professional investors and ECPs only target market – Solely for the purposes
of [the/each] manufacturer’s product approval process, the target market assessment in respect of the Notes has
led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients
only, each as defined in Directive 2014/65/EU (as amended, “MiFID II”); and (ii) all channels for distribution
of the Notes to eligible counterparties and professional clients are appropriate. [Consider any negative target
market.] 1 Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take
into consideration the manufacturer[’s/s’] target market assessment; however, a distributor subject to MiFID II
is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or
refining the manufacturer[’s/s’] target market assessment) and determining appropriate distribution channels.]
[UK MiFIR product governance/Professional investors and ECPs only target market – Solely for the
purposes of [the/each] manufacturer’s product approval process, the target market assessment in respect of the
Notes has led to the conclusion that: (i) the target market for the Notes is only eligible counterparties, as defined
in the FCA Handbook Conduct of Business Sourcebook (“COBS”), and professional clients, as defined in
Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018 (“UK MiFIR”); and (ii) all channels for distribution of the Notes to eligible counterparties and
professional clients are appropriate. [Consider any negative target market]1. Any [person subsequently offering,
selling or recommending the Notes (a “distributor”)]/[distributor] should take into consideration the
manufacturer[’s/s’] target market assessment; however, a distributor subject to the FCA Handbook Product
Intervention and Product Governance Sourcebook (the “UK MiFIR Product Governance Rules”) is responsible
for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the
manufacturer[’s/s’] target market assessment) and determining appropriate distribution channels.]
[PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The Notes are not intended to be offered, sold
or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or
more) of: (i) a retail client as defined in point (11) of Article 4(1) of [Directive 2014/65/EU (as amended, “MiFID
II”)]/[MiFID]; [or] (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance
Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10)
of Article 4(1) of MiFID II[●]/[; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as
amended, the “Prospectus Regulation”)] 2. Consequently no key information document required by Regulation
(EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise
making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes
or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs
Regulation.]
[PROHIBITION OF SALES TO UK RETAIL INVESTORS – The Notes are not intended to be offered, sold
or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of:
(i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic
law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); [or] (ii) a customer within the meaning
of the provisions of the Financial Services and Markets Act 2000 (“FSMA”) and any rules or regulations made
under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional
client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law
by virtue of the EUWA [●]/[; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129
as it forms part of domestic law by virtue of the EUWA]2. Consequently no key information document required
by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs
Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the UK
has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail
investor in the UK may be unlawful under the UK PRIIPs Regulation.]
1 If a negative target market is deemed necessary, wording along the following lines could be included: “The target market assessment
indicates that Notes are incompatible with the needs, characteristic and objectives of clients which are [fully risk averse/have no risk
tolerance or are seeking on-demand full repayment of the amounts invested].”
2 Paragraph (iii) is not required where the Notes have a denomination of at least C100,000 or equivalent.
97
[Singapore Securities and Futures Act Product Classification – In connection with Section 309B of the
Securities and Futures Act 2001 of Singapore (the “SFA”) and the Securities and Futures (Capital Markets
Products) Regulations 2018 of Singapore (the “CMP Regulations 2018”), the Issuer has determined, and hereby
notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are [“prescribed capital
markets products”]/[capital markets products other than prescribed capital markets products] (as defined in the
CMP Regulations 2018).]3
[This Pricing Supplement is for distribution to professional investors (as defined in Chapter 37 of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock
Exchange”)) (“Professional Investors”) only.
Notice to Hong Kong investors: The Issuer and the Guarantor confirm that the Notes are intended for purchase
by Professional Investors only and will be listed on the Hong Kong Stock Exchange on that basis. Accordingly,
the Issuer and the Guarantor confirm that the Notes are not appropriate as an investment for retail investors in
Hong Kong. Investors should carefully consider the risks involved.
The Hong Kong Stock Exchange has not reviewed the contents of this Pricing Supplement, other than to
ensure that the prescribed form disclaimer and responsibility statements, and a statement limiting
distribution of this Pricing Supplement to Professional Investors only have been reproduced in this Pricing
Supplement. Listing of the Programme and the Notes on the Hong Kong Stock Exchange is not to be taken
as an indication of the commercial merits or credit quality of the Programme, the Notes, the Issuer, the
Guarantor or the Group or quality of disclosure in this Pricing Supplement. Hong Kong Exchanges and
Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this Pricing
Supplement, make no representation as to its accuracy or completeness and expressly disclaim any liability
whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this
Pricing Supplement.
This Pricing Supplement, together with the Offering Circular (as defined below), includes particulars given in
compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
for the purpose of giving information with regard to the Issuer, the Guarantor and the Group. Each of the Issuer
and the Guarantor accepts full responsibility for the accuracy of the information contained in this Pricing
Supplement and confirms, having made all reasonable enquiries, that to the best of its knowledge and belief there
are no other facts the omission of which would make any statement herein misleading.]4
Pricing Supplement dated [●]
Haitong International Finance Holdings Limited
Issue of [Aggregate Principal Amount of Tranche] [Title of Notes]
Guaranteed by
Haitong Securities Co., Ltd.
( )
under the U.S.$1,000,000,000 Guaranteed Medium Term Note Programme
[Any person making or intending to make an offer of the Notes may only do so in circumstances in which no
obligation arises for the Issuer, the Guarantor or any [Manager] to publish a prospectus pursuant to [either of]
[Article 3 of [Regulation (EU) 2017/1129 (as amended, the “Prospectus Regulation”)]/[Prospectus
Regulation]][or][Section 85 of the [Financial Services and Markets Act 2000 (“FSMA”)]/[FSMA]] or
supplement a prospectus pursuant to [either of] Article 23 of the [Prospectus Regulation][or][Prospectus
Regulation as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018], in each
case, in relation to such offer.]5
3 For any Notes to be offered to Singapore investors, the Issuer to consider whether it needs to re-classify the Notes pursuant to Section
309B of the SFA prior to the launch of the offer.
4 Applicable for Notes to be listed on the Hong Kong Stock Exchange only.
5 Delete this if the “Prohibition of Sales to EEA Retail Investors” and/or “Prohibition of Sales to UK Retail Investors” legend is included
(because the Notes potentially constitute “packaged” products and no key information document will be prepared) and the “Prohibition
of Sales to EEA Retail Investors” and/or “Prohibition of Sales to UK Retail Investors” is specified to be “Applicable”.
98
This document constitutes the Pricing Supplement for the Notes described herein.
Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions of the
Notes (the “Conditions”) set forth in the Offering Circular dated [date] [and the supplement to it dated [date]]
([together,]the “Offering Circular”). This Pricing Supplement contains the final terms of the Notes and must be
read in conjunction with such Offering Circular. Full information on the Issuer, the Guarantor and the offer of
the Notes is only available on the basis of the combination of the Offering Circular and this Pricing Supplement.
[The following alternative language applies if the first tranche of an issue which is being increased was issued
under an Offering Circular with an earlier date.
Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions of the
Notes (the “Conditions”) set forth in the Offering Circular dated [original date]. This Pricing Supplement
contains the final terms of the Notes and must be read in conjunction with the Offering Circular dated [current
date] [and the supplemental offering circular dated [date]] ([together,]the “Offering Circular”), save in respect
of the Conditions which are extracted from the Offering Circular dated [original date] and are attached hereto.
Full information on the Issuer, the Guarantor and the offer of the Notes is only available on the basis of the
combination of the Offering Circular and this Pricing Supplement.]
[Include whichever of the following apply or specify as “Not Applicable”. Note that the numbering should remain
as set out below, even if “Not Applicable” is indicated for individual paragraphs or sub-paragraphs. Italics
denote guidance for completing the Pricing Supplement.]
1 (i) Issuer: Haitong International Finance Holdings Limited
(ii) Guarantor: Haitong Securities Co., Ltd. (
)
2 (i) Series Number: [●]
(ii) Tranche Number: [●]
(iii) Date on which the Notes will be [The Notes will be consolidated and form a
consolidated and form a single Series: single Series with [identify earlier Tranches] on
[the Issue Date/exchange of the Temporary
Global Note for interests in the Permanent
Global Note, as referred to in paragraph [26]
below, which is expected to occur on or about
[insert date]]]/[Not Applicable]
3 Specified Currency or Currencies: [●]
4 Aggregate Principal Amount:
(i) Series: [●]
(ii) Tranche: [●]
5 (i) Issue Price: [●] per cent. of the Aggregate Principal Amount
[plus accrued interest from [insert date] (if
applicable)]
(ii) [Net proceeds: [●]] (Delete for unlisted issuance)
99
6 (i) Specified Denominations: [●]6
(ii) Calculation Amount: [●]
7 (i) Issue Date: [●]
(ii) Interest Commencement Date: [specify/Issue Date/Not Applicable]
8 Maturity Date: [Fixed rate – specify date/Floating rate –
Interest Payment Date falling [on/in] or nearest
to [specify [date], month and year]]7
9 Interest Basis: [[●] per cent. Fixed Rate]
[[EURIBOR/HIBOR/CNH HIBOR/SOFR
Benchmark] +/-
[●] per cent. Floating Rate]
[Zero Coupon]
[Dual Currency]
[specify other]
(further particulars specified below)
10 Redemption/Payment Basis: [Redemption at par]
[Dual Currency Redemption]
[Partly Paid]
[Instalment]
[specify other]
11 Change of Interest Basis or Redemption/ [specify details of any provision for
Payment Basis: convertibility of Notes into another Interest
Basis or Redemption/Payment Basis]
[Not Applicable]
12 Put/Call Options: [Put Option]8
[Call Option]
[(See paragraph [20/21] below)]
[(further particulars specified below)]
[Not Applicable]
6 Notes (including Notes denominated in Sterling) in respect of which the issue proceeds are to be accepted by the Issuer in the United
Kingdom or whose issue otherwise constitutes a contravention of Section 19 of the FSMA and which have a maturity of less than one
year and must have a minimum redemption value of 100,000 (or its equivalent in other currencies). If the specified denomination is
expressed to be C100,000 or its equivalent and multiples of a lower principal amount (for example C1,000), insert the additional
wording as follows: “ C100,000 and integral multiples of C1,000 in excess thereof up to and including C199,000. No Notes in definitive
form will be issued with a denomination above C199,000.”
7 Note that for Renminbi and Hong Kong dollar denominated Fixed Rate Notes where the Interest Payment Dates are subject to
modification it will be necessary to use the second option here and the following words should be added: “provided that if any Interest
Payment Date falls on a day which is not a [Business Day], the Interest Payment Date will be the next succeeding [Business Day] unless
it would thereby fall in the next calendar month in which event the Interest Payment Date shall be brought forward to the immediately
preceding [Business Day].”
8 For as long as Bearer Notes issued in accordance with TEFRA D are represented by a Temporary Global Note, an Investor Put shall
not be available unless the certification required under TEFRA D with respect to non-U.S. beneficial ownership has been received by
the Issuer or the Agent.
100
13 (i) [Board [and shareholder]] approval[s] for [●] [and [●], respectively]
issuance of Notes and Guarantee obtained:
(N.B. Only relevant where Board (or similar)
authorisation is required for the particular
tranche of Notes or related Guarantee)
(ii) Regulatory approval for issuance of Notes [●]/[None required]9
obtained:
14 Listing: [Hong Kong Stock Exchange/specify other/None]
(For Notes to be listed on the Hong Kong Stock
Exchange, insert the expected effective listing
date of the Notes)
15 Method of distribution: [Syndicated/Non-syndicated]
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE
16 Fixed Rate Note Provisions: [Applicable/Not Applicable]
(If not applicable, delete the remaining
subparagraphs of this paragraph)
(i) Rate(s) of Interest: [●] per cent. per annum [payable [annually/
semi-annually/quarterly/specify other] in arrear]
(ii) Interest Payment Date(s): [●] in each year [adjusted in accordance with
[specify Business Day Convention and any
applicable Business Centre(s) for the definition
of “Business Day”]]
(N.B.: This will need to be amended in the case
of long or short coupons)
(iii) Fixed Coupon Amount(s): [●] per Calculation Amount10
(iv) Broken Amount(s): [[●] per Calculation Amount, payable on the
Interest Payment Date falling [in/on] [●]/
Not Applicable]
(v) Day Count Fraction: [30/360/Actual/Actual – ICMA/ISDA/Actual/365
(Fixed)11 or [specify other]]
(vi) Determination Date(s): [[●] in each year/Not Applicable]
(Insert regular interest payment dates, ignoring
issue date or maturity date in the case of a long
or short first or last coupon)
9 If the NDRC Administrative Measures are applicable to the particular tranche of Notes, the description and date of the NDRC
Pre-Issuance Registration Certificate should be included.
10 For Renminbi or Hong Kong dollar denominated Fixed Rate Notes where the Interest Payment Dates are subject to modification the
following alternative wording is appropriate: “Each Fixed Coupon Amount shall be calculated by multiplying the product of the Rate
of Interest and the Calculation Amount by the Day Count Fraction and rounding the resultant figure to the nearest CNY0.01, CNY0.005
being rounded upwards in the case of Renminbi denominated Fixed Rate Notes and to the nearest HK$0.01, HK$0.005 for the case of
Hong Kong dollar denominated Fixed Rate Notes, being rounded upwards.”
11 Applicable to Hong Kong dollar denominated Fixed Rate Notes and Renminbi denominated Fixed Rate Notes.
101
(N.B.: This will need to be amended in the case
of regular interest payment dates which are not
of equal duration)
(N.B.: Only relevant where Day Count Fraction
is Actual/Actual – ICMA)
(vii) Other terms relating to the method of [None/give details]
calculating interest for Fixed Rate Notes:
17 Floating Rate Note Provisions: [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-
paragraphs of this paragraph)
(i) Interest Period(s): [●] [[, subject to adjustment in accordance with
the Business Day Convention set out in (v)
below][, not subject to any adjustment[, as the
Business Day Convention in (v) below is
specified to be Not Applicable]]]
(ii) Specified Interest Payment Dates: [[●] in each year[, subject to adjustment in
accordance with the Business Day Convention
set out in (v) below]/[, not subject to any
adjustment[, as the Business Day Convention in
(v) below is specified to be Not Applicable]]]
(iii) Interest Period Date: [Not Applicable]/[●][in each year[, subject to
adjustment in accordance with the Business Day
Convention set out in (v) below]/[, not subject
to any adjustment[, as the Business Day
Convention in (v) below is specified to be Not
Applicable]]] (Not applicable unless different
from Interest Payment Date)
(iv) Business Day Convention: [Floating Rate Business Day
Convention/Following Business Day
Convention/Modified Following Business Day
Convention/Preceding Business Day
Convention/specify other]/[Not Applicable]
(v) Business Centre(s): [●]
(vi) Manner in which the Rate(s) of Interest is [Screen Rate Determination/ISDA
to be determined: Determination/specify other]
(vii) Party responsible for calculating the [[Citibank, N.A., London Branch/Citicorp
Rate(s) of Interest and/or Interest International Limited] acting as Calculation
Amount(s): Agent/specify other]
(viii) Screen Rate Determination:
(a) Reference Rate: [EURIBOR/HIBOR/CNH HIBOR/SOFR
Benchmark/other (give details)]
(b) Interest Determination Date(s): [●]
(Refer to the definition of “Interest
Determination Date”. Interest Determination
Date for SOFR Benchmark needs to be specified
here)
102
(c) Relevant Screen Page: Not Applicable/[●]
(Not applicable in the case where the Reference
Rate is SOFR Benchmark. In the case of
EURIBOR, if not Reuters EURIBOR01 ensure it
is a page which shows a composite rate or
amend the fallback provisions appropriately)
(d) SOFR Benchmark: [Not Applicable/Simple SOFR Average/
Compounded Daily SOFR/Compounded SOFR
Index]
(e) Compounded Daily SOFR: [Not Applicable/SOFR Lag/SOFR Observation
Shift/SOFR Payment Delay/SOFR Lockout]
(f) Lookback Days: [Not Applicable/[●] U.S. Government Securities
Business Day(s)]
(Only applicable in the case of SOFR Lag)
(g) SOFR Observation Shift Days: [Not Applicable/[●] U.S. Government Securities
Business Day(s)]
(Only applicable in the case of SOFR
Observation Shift or Compounded SOFR Index)
(h) Interest Payment Delay Days: [Not Applicable/[●] Business Day(s)]
(Only applicable in the case of SOFR Payment
Delay)
(i) SOFR Rate Cut-Off Date: [Not Applicable/the day that is the [●] U.S.
Government Securities Business Day(s) prior to
[the end of each Interest Accrual Period, the
Maturity Date or the relevant date for
redemption (as the case may be)]]
(Only applicable in the case of Simple SOFR
Average, SOFR Payment Delay or SOFR
Lockout)
(j) SOFR IndexStart: [Not Applicable/[●] U.S. Government Securities
Business Day(s)]
(Only applicable in the case of Compounded
SOFR Index)
(k) SOFR Index End: [Not Applicable/[●] U.S. Government Securities
Business Day(s)]
(Only applicable in the case of Compounded
SOFR Index)
(l) Observation Shift Days: [Not Applicable/[●] U.S. Government Securities
Business Day(s)]
(Only applicable in the case of Compounded
SOFR Index)
103
(ix) ISDA Determination: [Applicable/Not Applicable]
(If not applicable, delete the remaining items of
this subparagraph)
Floating Rate Option: [●]
Designated Maturity: [●]
Reset Date: [●]
ISDA Definitions: [2006/2021/specify other]
(x) Linear Interpolation: [Not Applicable/Applicable – the Rate of
Interest for the [long/short] [first/last] Interest
Accrual Period shall be calculated using Linear
Interpolation (specify for each short or long
interest period)]
(xi) Margin(s): [+/-] [●] per cent. per annum
(xii) Minimum Rate of Interest: [●] per cent. per annum
(xiii) Maximum Rate of Interest: [●] per cent. per annum
(xiv) Day Count Fraction: [Actual/Actual/Actual/Actual-[ISDA/ICMA]/
Actual/365(Fixed)/Actual/365(Sterling)/Actual/
360/30/360, 360/360 or Bond Basis/30E/360 or
Eurobond Basis/30E/360 (ISDA)/other]
(xv) Fallback provisions, rounding provisions [Condition [5(b)(iii)(D)](Benchmark
and any other terms relating to the method Discontinuation (for Floating Rate Notes not
of calculating interest on Floating Rate referencing SOFR Benchmark))/Condition
Notes, if different from those set out in the [5(b)(iii)(E)](Benchmark Discontinuation (SOFR
Conditions: Benchmark))/specify other if different from those
set out in the Conditions]
18 Zero Coupon Note Provisions: [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-
paragraphs of this paragraph)
(i) Amortisation Yield: [●] per cent. per annum
(ii) Day Count Fraction: [●]
(iii) Any other formula/basis of determining [●]
amount payable:
19 Dual Currency Note Provisions: [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-
paragraphs of this paragraph)
(i) Rate of Exchange/method of calculating [Give or annex details]
Rate of Exchange:
104
(ii) Party, if any, responsible for calculating [[Citibank, N.A., London Branch/Citicorp
the principal and/or interest due: International Limited] acting as Calculation
Agent/specify other]
(iii) Provisions applicable where calculation by [Need to include a description of market
reference to Rate of Exchange impossible disruption or settlement disruption events and
or impracticable: adjustment provisions]
(iv) Person at whose option Specified [●]
Currency(ies) is/are payable:
PROVISIONS RELATING TO REDEMPTION
20 Call Option: [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-
paragraphs of this paragraph)
(i) Optional Redemption Date(s): [●]
(ii) Optional Redemption Amount and method, [[●] per Calculation Amount/specify other/see
if any, of calculation of such amount(s): Appendix]
(iii) If redeemable in part:
(a) Minimum Redemption Amount: [●] per Calculation Amount
(b) Maximum Redemption Amount: [●] per Calculation Amount
(iv) Notice period (if other than as set out in [●]
the Conditions):
(N.B. If setting notice periods which are
different to those provided in the Conditions, the
Issuer is advised to consider the practicalities of
distribution of information through
intermediaries, for example, clearing systems
and custodians, as well as any other notice
requirements which may apply, for example, as
between the Issuer and the Issuing and Paying
Agent or the Trustee)
21 Put Option: [Applicable/Not Applicable]
(If not applicable, delete the remaining sub-
paragraphs of this paragraph)
(i) Optional Redemption Date(s): [●]
(ii) Optional Redemption Amount and method, [[●] per Calculation Amount/specify other/see
if any, of calculation of such amount(s): Appendix]
105
(iii) Notice period (if other than as set out in [●]
the Conditions):
(N.B. If setting notice periods which are
different to those provided in the Conditions, the
Issuer is advised to consider the practicalities of
distribution of information through
intermediaries, for example, clearing systems
and custodians, as well as any other notice
requirements which may apply, for example, as
between the Issuer and the Issuing and Paying
Agent or the Trustee)
22 Final Redemption Amount: [[●] per Calculation Amount/specify other/see
Appendix]
23 Early Redemption Amount (Change of Control): [[●] per Calculation Amount/specify other/see
Appendix]
(N.B. 101 per cent. of the principal amount of
the Notes unless otherwise agreed)
24 Early Redemption Amount (No Registration [[●] per Calculation Amount/specify other/
Event): see Appendix]
25 Early Redemption Amount payable on [[●] per Calculation Amount/specify other/
[redemption for taxation reasons or on event of see Appendix]
default] and/or the method of calculating the
same (if required or if different from that set out
in the Conditions):
GENERAL PROVISIONS APPLICABLE TO THE NOTES
26 Form of Notes: [Bearer Notes:
[Temporary Global Note exchangeable for a
permanent Global Note which is exchangeable
for Definitive Notes in the limited circumstances
specified in the permanent Global Note]
[Temporary Global Note exchangeable for
Definitive Notes on [●] days’ notice 12]
[Permanent Global Note exchangeable for
Definitive Notes in the limited circumstances
specified in the permanent Global Note]]
[Registered Notes:
Global Certificate exchangeable for individual
Certificates in the limited circumstances
described in the Global Certificate]
12 If the Specified Denominations in paragraph [6] includes language substantially to the following effect: “C100,000 and integral
multiples of C1,000”, the exchange upon notice/at any time options should not be expressed to be applicable.
106
27 Additional Financial Centre(s) or other special [Not Applicable/give details]
provisions relating to payment dates:
(Note that this paragraph relates to the date of
payment and not the end dates of Interest
Periods for the purposes of calculating the
amount of interest, to which sub-paragraphs
[16(ii) and 17(vi)] relate)
28 Talons for future Coupons or Receipts to be [Yes/No. If yes, give details]
attached to definitive Bearer Notes (and dates on
which such Talons mature):
29 Details relating to Partly Paid Notes: amount of [Not Applicable/give details. N.B.: a new form
each payment comprising the Issue Price and of Temporary Global Note and/or Permanent
date on which each payment is to be made and Global Note may be required for Partly Paid
consequences of failure to pay, including any issues]
right of the Issuer to forfeit the Notes and
interest due on late payment:
30 Details relating to Instalment Notes: [Applicable/Not Applicable/give details]
(If not applicable, delete the remaining
sub-paragraphs of this paragraph)
(i) Instalment Amount(s): [●]
(ii) Instalment Date(s): [●]
(iii) Minimum Instalment Amount: [●]
(iv) Maximum Instalment Amount: [●]
31 Redenomination applicable: [Not Applicable]/[The provisions annexed to this
Pricing Supplement apply]
32 Consolidation provisions: [Not Applicable]/[The provisions annexed to this
Pricing Supplement apply]
33 Other terms or special conditions: [Not Applicable/give details]
DISTRIBUTION
34 (i) If syndicated, names of Managers: [Not Applicable/give names]
(ii) Date of Subscription Agreement: [●]
(iii) Stabilisation Manager(s) (if any): [Not Applicable/give name]
35 If non-syndicated, name of relevant Dealer: [Not Applicable/give name]
36 U.S. Selling Restrictions: [Reg. S Category 2; TEFRA D/TEFRA
C/TEFRA not applicable13]
37 Additional selling restrictions: [Not Applicable/give details]
13 “TEFRA not applicable” is only available for Bearer Notes with a with a term of 365 days or less (taking into account any unilateral
extensions and rollovers) or Registered Notes.
107
38 Prohibition of Sales to EEA Retail Investors: [Applicable/Not Applicable]
(N.B. If the Notes clearly do not constitute
“packaged” products or the Notes do constitute
“packaged” products and a key information will
be prepared in the EEA, “Not Applicable”
should be specified. If the Notes may constitute
“packaged” products and no key information
document will be prepared in the EEA,
“Applicable” should be specified.)
39 Prohibition of Sales to UK Retail Investors: [Applicable/Not Applicable]
(N.B. If the Notes clearly do not constitute
“packaged” products or the Notes do constitute
“packaged” products and a key information will
be prepared in the UK, “Not Applicable” should
be specified. If the Notes may constitute
“packaged” products and no key information
document will be prepared in the UK,
“Applicable” should be specified.)
OPERATIONAL INFORMATION
40 ISIN: [●]
41 Common Code: [●]
42 CMU Instrument Number: [●]
43 Any clearing system(s) other than Euroclear, [Not Applicable/give name(s) and number(s)]
Clearstream or the CMU and the relevant
identification number(s):
44 Legal entity identifier (LEI) of the Issuer: 254900HGXUILEFY9XQ36
45 Delivery: Delivery [against/free of] payment
46 Additional Paying Agent(s) (if any): [[●]/Not Applicable]
47 The aggregate principal amount of Notes issued [Not Applicable/U.S.$[●]]
has been translated into U.S. dollars at the rate
of [●], producing a sum of (for Notes not
denominated in U.S. dollars):
48 Rating(s): [Not Applicable]/[The Notes to be issued [are
expected to be] rated:
[●]: [●]]
(The above disclosure should reflect the rating
allocated to Notes of the type being issued
under the Programme generally or, where the
issue has been specifically rated, that rating)
108
HONG KONG SFC CODE OF CONDUCT
49 Rebates: [A rebate of [●] bps is being offered by the
[Issuer] to all private banks for orders they
place (other than in relation to Notes subscribed
by such private banks as principal whereby it is
deploying its own balance sheet for onward
selling to investors), payable upon closing of
this offering based on the principal amount of
the Notes distributed by such private banks to
investors. Private banks are deemed to be
placing an order on a principal basis unless they
inform the CMIs otherwise. As a result, private
banks placing an order on a principal basis
(including those deemed as placing an order as
principal) will not be entitled to, and will not be
paid, the rebate.]/[Not Applicable]
50 Contact email addresses [of the Overall [Include relevant contact email addresses of the
Coordinators] where underlying investor Overall Coordinators where the underlying
information in relation to omnibus orders should investor information should be sent – Overall
be sent: Coordinators to provide]/[Not Applicable]
51 [Marketing and Investor Targeting Strategy: [Provide details if different from the Programme
Offering Circular]]
[USE OF PROCEEDS
Give details if different from the “Use of Proceeds” section in the Offering Circular.]
[STABILISATION
In connection with the issue of the Notes, any of the [Dealers/Managers] named as Stabilisation Manager in this
Pricing Supplement (or persons acting on behalf of any Stabilisation Manager(s)) may over-allot Notes or effect
transactions with a view to supporting the market price of the Notes at a level higher than that which might
otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or
after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun,
may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and
60 days after the date of the allotment of the Notes. Any stabilisation action or over-allotment must be conducted
by the relevant Stabilisation Manager(s) (or person(s) acting on behalf of any Stabilisation Manager(s)) in
accordance with all applicable laws and rules.]
[LISTING APPLICATION
This Pricing Supplement comprises the final terms required for the issue of Notes described herein pursuant to
the U.S.$1,000,000,000 Guaranteed Medium Term Note Programme of Haitong International Finance Holdings
Limited.]
109
RESPONSIBILITY
The Issuer and the Guarantor accept responsibility for the information contained in this Pricing Supplement.
Signed on behalf of the Issuer: Signed on behalf of the Guarantor:
By: By:
Duly authorised Duly authorised
110
USE OF PROCEEDS
Unless otherwise specified in the applicable Pricing Supplement, the Group intends to use the proceeds of each
issuance of Notes outside of the PRC, for the purposes of refinancing of existing indebtedness and replenishing
working capital (as approved by the NDRC).
111
CAPITALISATION AND INDEBTEDNESS
The following table sets forth on Guarantor’s audited consolidated capitalisation and indebtedness as at 31
December 2022. This table should be read in conjunction with the Guarantor’s audited consolidated financial
statements as at and for the year ended 31 December 2022 and the accompanying notes, which are included
elsewhere in this Offering Circular:
As at 31 December 2022
Actual
RMB U.S.$(5)
(in millions)
(1)
Borrowings 90,816.2 13,167.1
Bonds payable(2) 181,830.9 26,363.0
Short-term financing bills payables 16,159.1 2,342.8
Total indebtedness 288,806.2 41,872.9
Total equity(3) 177,622.1 25,752.8
Total capitalisation(4) 466,428.3 67,625.7
(1) Borrowings comprises borrowings under current liabilities and long-term borrowings under non-current liabilities.
(2) Bonds payable include bonds payable under current liabilities and non-current liabilities.
(3) Total equity comprises share capital, capital reserve, revaluation reserve, translation reserve, general reserves, retained earnings, and
non-controlling interests.
(4) Total capitalisation equals the sum of total indebtedness and total equity.
(5) Translation of Renminbi amounts to U.S. dollar amounts was made at a rate of RMB6.8972 to U.S.$1.00 (the noon buying rate in New
York City on 30 December 2022 as set forth in the weekly H.10 statistical release of the Board of Governors of the Federal Reserve
System).
Subsequent to 31 December 2022, the Guarantor had various onshore debt issuances, mainly including the first
tranche of corporate bonds (type I) of 2023 in February 2023, with a total issue size of RMB2.5 billion and a
term of two years; the first tranche of corporate bonds (type II) of 2023 in February 2023, with a total issue size
of RMB3.0 billion and a term of three years; the second tranche of corporate bonds (type I) of 2023 in March
2023, with a total issue size of RMB2.5 billion and a term of two years; the second tranche of corporate bonds
(type II) of 2023 in March 2023, with a total issue size of RMB1.7 billion and a term of three years; the third
tranche of corporate bonds (type I) of 2023 in March 2023, with a total issue size of RMB3.3 billion and a term
of two years; the third tranche of corporate bonds (type II) of 2023 in March 2023, with a total issue size of
RMB2.7 billion and a term of three years ; the fourth tranche of corporate bonds (type I) of 2023 in April 2023,
with a total issue size of RMB2.0 billion and a term of two years; and the fourth tranche of corporate bonds (type
II) of 2023 in April 2023, with a total issue size of RMB4.0 billion and a term of three years. Subsequent to 31
December 2022, the Guarantor also issued CNY4,000,000,000 3.40 per cent. guaranteed bonds due 2026 in the
China (Shanghai) Pilot Free Trade Zone market.
Except as otherwise disclosed above, there has been no material change in the Guarantor’s consolidated
capitalisation and indebtedness since 31 December 2022. The Guarantor and its subsidiaries may, from time to
time, issue debt or other securities in various currencies and tenors depending on market conditions.
112
DESCRIPTION OF THE ISSUER
FORMATION
The Issuer, Haitong International Finance Holdings Limited, is a BVI business company with limited liability
incorporated in the British Virgin Islands under the laws of the British Virgin Islands on 19 September 2013 with
company number 1791534. Its registered office is located at Kingston Chambers, P.O. Box 173, Road Town,
Tortola, British Virgin Islands. The Issuer is a wholly-owned subsidiary of Haitong International Holdings, a
Hong Kong subsidiary wholly-owned by Haitong Securities.
BUSINESS ACTIVITY
As of the date of this Offering Circular, the Issuer has not engaged, since its incorporation, in any material
activities other than those relating to the issue of U.S.$900,000,000 3.95 per cent. credit enhanced bonds due
2018, the issue of CNY4,000,000,000 3.40 per cent. guaranteed bonds due 2026, and the issues of the Notes
under the Programme and the on-lending of the proceeds thereof to the Guarantor or its subsidiaries or affiliates,
and the authorisation of documents and agreements referred to in this Offering Circular to which it is or will be
a party. The Issuer may, from time to time, issue debt or other securities in various currencies and tenors
depending on market conditions.
DIRECTORS AND OFFICERS
The directors of the Issuer are Mr. ZHANG Shaohua and Mr. SUN Tong. The business address of Mr. ZHANG
Shaohua is at Haitong Securities Tower, 689 Guangdong Road, Shanghai, 200001, China. The business address
of Mr. SUN Tong is at 22/F, Li Po Chun Chambers, 189 Des Voeux Road, Central, Hong Kong. There are no
potential conflicts of interest between any duties of the Issuer’s directors to the Issuer, and their private interests
and/or other duties. As at the date of this Offering Circular, the telephone number of the Issuer is +852-2848
4333.
SHARE CAPITAL
As of the date of this Offering Circular, the Issuer is authorised to issue a maximum of 50,000 shares of one class
of U.S.$1.00 par value. As of the date of this Offering Circular, one share, which is held by Haitong International
Holdings, a wholly-owned subsidiary of Haitong Securities, had been issued and credited as fully paid,
representing the entire issued shares of the Issuer. None of the equity securities of the Issuer was listed or dealt
in on any stock exchange and no listing or permission to deal in such securities was being or was proposed to
be sought as of the date of this Offering Circular.
FINANCIAL INFORMATION
As of the date of this Offering Circular, the Issuer has no material assets or revenues and has no outstanding
borrowings or contingent liabilities other than those relating to the issue of CNY4,000,000,000 3.40 per cent.
guaranteed bonds due 2026. Under British Virgin Islands law, the Issuer is not required to publish interim or
annual financial statements. The Issuer has not published, and does not propose to publish, any financial
statements in the future. The Issuer is, however, required to keep proper books of accounts as are necessary to
give a true and fair view of the state of the Issuer’s affairs and to explain its transactions. Effective from 1
January 2023, the Issuer is also required to file annual return with its registered agent within 9 months after the
end of each year to which the financial annual return relates.
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DESCRIPTION OF THE GROUP
OVERVIEW
The Group is a leading full-service securities firm in the PRC with an integrated business platform, extensive
branch network and substantial customer base. The Group has established prudent operating strategies and is the
only major PRC securities firm established in the 1980s that remains in continuous operations under the same
brand without receiving government-backed capital injections or being the target of a successful acquisition or
restructuring. Its A Shares have been listed on the Shanghai Stock Exchange with stock code 600837 since July
2007 and its H Shares have been listed on the Main Board of the Hong Kong Stock Exchange with stock code
6837 since April 2012. Leveraging its integrated business platform, the Group provides a comprehensive range
of financial products and services domestically and overseas, and primarily focuses on five principal business
lines in the PRC, comprising wealth management, investment banking, asset management, trading and
institutional client services, and financial leasing. The Group has gained leading market positions across multiple
business lines in the PRC securities industry, and it also provides a variety of securities products and services
overseas. In addition, the Group has a long track record of brokerage operations across business cycles and
enjoys a strong market position in China’s retail brokerage segment. The Group has become one of the leading
players in China’s financial leasing segment following the acquisition of UT Capital Group.
The Group is one of the largest securities firms in the PRC. As at 31 December 2020, 2021 and 2022, the Group
had total assets of RMB694,073.4 million, RMB744,925.1 million and RMB753,607.6 million, respectively, and
total equity of RMB168,126.3 million, RMB177,754.8 million and RMB177,622.1 million, respectively. For the
years ended 31 December 2020, 2021 and 2022, its total revenue, gains and other income was RMB54,277.2
million, RMB57,809.6 million and RMB41,980.2 million, respectively, and its profit for the years was
RMB12,037.2 million, RMB13,747.9 million and RMB5,196.2 million, respectively. As at 31 December 2022,
the Group had 337 securities and futures brokerage business departments (including 301 securities business
departments and 36 futures business departments) located across 30 provinces, municipalities and autonomous
regions in the PRC, as well as branches, subsidiaries or offices in 15 countries and regions including Asia,
Europe, North America, South America and Oceania. As at 31 December 2022, the Group had approximately over
21 million domestic and overseas customers.
As at 31 December 2022, the five principal business lines of the Group in the PRC include:
Wealth management. The Group engages in providing comprehensive financial services and investment
solutions to retail and high-net-worth customers, including retail brokerage business, sales of financial
products, financing business such as margin financing, securities lending and stock pledge, and future
business.
Investment banking. The Group engages in providing sponsorship and underwriting services for corporate
and government customers with regard to financing activities in both equity and debt capital markets, the
provision of financial advisory services to corporate customers for mergers and acquisitions as well as asset
restructurings, and the provision of NEEQ services. Based on the nature of business, the investment banking
business of the Group is further categorised into segments of equity financing business, debt financing
business, mergers and acquisitions financing business, and NEEQ services and structural financing business.
The Group strives to provide customers with “one stop” domestic and overseas investment banking services.
Asset management. The Group offers comprehensive investment management services on diversified
products to individuals, corporations and institutional clients, including asset management, fund
management, public and private equity investment services. Haitong Asset Management carries out
businesses including targeted asset management, collective asset management, specialised asset
management, QDII business, and innovative business. The principal businesses of HFT Investment
Management and Fullgoal Fund Management include management of mutual funds (including QDII), asset
management for corporate annuities, NSSF and specific customers, providing professional fund investment
financing services for investors. The Group also operates a number of professional investment management
platforms for private equity (PE) investment business, which provides services including management of
industrial investment funds, investment consultation, promotion and establishment of investment funds, etc.
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Trading and institutional client services. The Group engages in providing stock sale and trading, prime
brokerage, stock borrowing and lending and stock research services in major global financial markets for
global institutional investors, as well as the issuance and market-making services for various financial
instruments such as fixed income products, currency and commodity products, futures and options, exchange
traded funds and derivatives. The trading and institutional client services of the Group are further categorised
into segments of trading business and institutional client business. The Group exerts and enhances the
advantage of synergies among business segments through investment funds and private equity projects and
focuses on exploring investment opportunities with reasonable capital returns and further expands client
relationships and promotes the overall growth of its business.
Financial leasing. The Group provides innovative financial service and solutions to individuals, enterprises
and governments, including financial leasing, operating leasing, factoring, entrusted loans and relevant
advisory services. UniTrust is the primary leasing business platform of the Group, which engages in a wide
range of industries, including infrastructure, transportation & logistics, industrials, education, health care,
construction & real estate and the chemical industry, etc. UniTrust continually sticks to the development
strategies of “One Body, Two Wings ( )”, and “One Big One Small ( )”, further clarified the
market demand and management resources under the traditional business, optimised and perfected the
corresponding supporting system and process, and promoted the specialisation and localisation of various
business units so as to improve the efficiency of business operation and the competitiveness of business in
the market. At the same time, UniTrust further explored diversified financing channels and appropriately
managed its debt structure to effectively control its capital cost and liquidity risk. It also enhanced the
comprehensive risk management system and the quantitative and qualitative analysis management functions,
laying a solid foundation for the efficient implementation of projects.
The Group conducts its overseas business primarily through Haitong International Securities (listed on the Main
Board of the Hong Kong Stock Exchange under stock code 665), a leading full-service securities firm in Hong
Kong which provides a full spectrum of financial offerings including private wealth management, corporate
finance, asset management, global markets (key businesses include sales and trading of both equity and fixed
income products, prime brokerage and risk management solutions, and research advisory) and investment
businesses as well as Haitong Bank which is previously known as BESI and is a leading investment bank in
Portuguese-speaking and Spanish-speaking regions specialised in corporate banking, investment banking and
asset management with over 20 years’ experience. By acquisition and consolidation of Haitong International
Securities and Haitong Bank, and establishment of Shanghai FTZ Branch, the Group has established a platform
to implement the “Belt and Road” initiative and the Guangdong-Hong Kong-Macao Greater Bay Area strategy,
and an industry-leading international business platform and hence acquired first-mover advantages in the
Asia-Pacific region, as well as the forward-looking strategic reserve in Europe and the United States.
The Group has experienced rapid growth and achieved leading market positions in Developing New Businesses
in the PRC securities industry. The Group is the first securities firm to conduct OTC business in the PRC
securities market and is one of the first market makers eligible for commodity options on the Dalian Commodity
Exchange and the Zhengzhou Commodity Exchanges, as well as among the first batch of securities firms eligible
as a lead underwriter under the “Bond Connect” scheme. The Group is one of the first batch securities institutions
to establish FTZ branch and participate in the free trade accounting unit system of the FTZ, as well as the first
PRC securities firm that completed the cross-border financing project under free trade. In addition, the Group
adhered to the strategy of “development driven by technology” and is the first securities company in the industry
with renowned international certifications in four areas, including operation and maintenance service system,
information security system, software research and development system and software testing system.
Leveraging its prudent operating strategies and proven execution capabilities, the Group has gained leading
market positions in securities and futures brokerage, investment banking and other traditional businesses in the
PRC. According to the data obtained from the SAC, the Shanghai Stock Exchange, the Shenzhen Stock
Exchange, the CSRC and Wind Info, among all PRC securities firms, the Group ranked:
third and fourth in the industry in terms of deal numbers (including those on the BSE) and fundraising
amount of IPO transactions, respectively, for the year ended 31 December 2022;
second in the industry in terms of deal numbers and fundraising amount of IPO transaction on the STAR
Market for the year ended 31 December 2022;
first in the industry in terms of deal numbers and fundraising amount of IPO transactions in the Yangtze
River Delta for the year ended 31 December 2022;
115
first and third in the industry in terms of deal numbers and fundraising amount, respectively, of listing
enterprises, in the biopharmaceutical sector for the year ended 31 December 2022;
third among all investment banks in Hong Kong in terms of the number of IPO projects underwritten for the
year ended 31 December 2022;
third among all investment banks in Hong Kong in the China Risk G3 + CNY bond issuance market in terms
of the number of issuances for the year ended 31 December 2022;
second in the industry in terms of amount of corporate bonds underwritten for the year ended 31 December
2022;
top in the industry in term of both the deal numbers of IPO transactions and the offering size for the year
ended 31 December 2021;
top in terms of the total number of BSE and NEEQ customers for the year ended 31 December 2021;
among the top four in the industry in terms of the total number of users of eHaitong Cai’s (e ) mobile
platform and the monthly active users for the year ended 31 December 2021;
second in the industry in terms of the market share of the futures agency transaction volume for the year
ended 31 December 2021;
third and fourth in terms of the deal numbers and fundraising amount of IPO transactions, respectively, for
the year ended 31 December 2021;
second and fourth in terms of deal numbers and the fundraising amount of IPO transactions, respectively, on
the STAR Market, for the year ended 31 December 2021;
fifth in terms of deal numbers of Merger and Acquisition deals completed for the year ended 31 December
2021;
sixth in the domestic debt capital market in terms of both the number of deals completed and the fundraising
amount for the year ended 31 December 2021;
first in the PRC debt capital market in terms of the underwriting amount of enterprise bonds for the year
ended 31 December 2021;
top among large companies in overall performance of equity and fixed income funds with a term of one year
or three years as at the end of 2021;
among the top three in the evaluation of research institutions of securities companies held by the New
Fortune and other media in 2021; and
first in 19 items in the 2021 “Asiamoney” brokers’ poll.
The Group is frequently designated by the PRC regulatory authorities as one of the first PRC securities firms to
participate in pilot programmes for new securities products and services such as stock pledge financing, stock
repo trading and OTC products. Benefiting from its strong capital position, substantial customer base and proven
execution capabilities, the Group has experienced rapid growth and achieved leading market positions in
Developing New Businesses in the PRC securities industry.
In recent years, the Group has received a number of awards and honours in recognition of its outstanding
performance and management capabilities, including, among others:
the “Excellent Market Maker Gold Prize” and “New Variety Listing Outstanding Contribution Award” by
China Financial Futures Exchange 2022 annual stock index options in 2022;
the Second Prize of Financial Technology Development Award by People’s Bank of China for 2021 (2021
) in 2022;
116
the Third Prize of the Eighth Science and Technology Award for Securities and Futures (
) in 2022;
the Outstanding Research Achievements of Enterprises under Shanghai State-owned Assets Supervision and
Administration Commission ( ) in 2022;
the Third Batch Informatization Demonstration Projects of Enterprises under Shanghai State-owned Assets
Supervision and Administration Commission ( ) in 2022;
four prizes in the Annual Evaluation of the Business Development Quality of the CCDC Members (
) in 2022;
the ESG rating of the Company was raised to “A” by MSCI in 2022;
the “Best Listed Company” and the “Best Company of ESG Practice in Listed Companies” in the Golden
Bauhinia Awards in 2022;
included in the Local SOEs Social Responsibility Pioneer 100 Index in 2022;
“Excellent Corporate Bonds Underwriter” (“ ”) and “Excellent Underwriter of
Innovative Products in Corporate Bonds” (“ ”) by SSE in 2021;
Excellent Award of “the 2021 Key Research Topic of the Securities Association of China” in 2021;
second prize of “the Excellent Topic of The Financial Science and Technology Research and Development
Centre of the Securities and Futures Industry (Shenzhen)” in 2021;
first prize of “Shanghai Financial Innovation Achievements Award for the year 2020” in 2021;
second prize of “2020 Financial Technology Development Award” jointly selected by PBOC and CSRC in
2021;
“Charity Star” Shanghai Nomination Award in 2021;
“Golden Tripod Award of China International Financial Exhibition 2020” (“2020 ”) in
2020;
“Greatest Achievement Project Award” (“ ”) award for the Robotic Process Automation
(“RPA”) by the Cloud Application Branch ( ) of the China Computer User Association in 2020;
“2020 Comprehensive Service APP King Tripod Award of China Securities Industry” (2020
APP ), “Outstanding APP Award of China Securities Companies” ( APP )
and “Best Wealth Management APP Award” ( APP) award for the eHaitong Cai (e ) APP
in 2020;
Fund Award – Equity Global 3 Years in Lipper Fund Awards Hong Kong 2020 award for Haitong Global
Diversification Fund of Haitong International; and “Best Fund House, China Offshore” in “2020 Asset
Management Selection” award for Haitong International by AsianInvestor in 2020;
11th Session of “China Charity Award” Shanghai Nomination Award by Shanghai Civil Affairs Bureau in
2020;
Emperor Tripod Award for Cultural Development and Poverty Alleviation Public Welfare Team of Fenghua
“Zheng” Mao National Securities Fund Cultural Development Video Selection Junding Award by People’s
Daily Financial Media Group and Securities Times in 2020;
“Top Ten Most Respected Investment Banks” by Securities Times in 2019;
“Top Ten Securities Firm of Golden Bull Award” by China Securities Journal in 2019;
first place of “Most Influential Research Institutions” by New Fortune in 2019;
“2018 Outstanding Enterprises” by China Business Network in 2019;
“Most Influential Chinese Securities Brokers”, “Most Influential Brokerage Brokers” and “Most Popular
App” by National Business Daily in 2019;
117
“Class A Evaluation of Information Disclosure of Listed Companies in 2018-2019” by Shanghai Stock
Exchange in 2019;
“Appreciation for Haitong Securities Active Participation in Poverty Alleviation and Donation” by Securities
Association of China and China Foundation for Poverty Alleviation in 2019;
“Top 60 of China CSR Brands” by China Association of Social Workers – Corporate Citizen Committee in
2019;
“2019 Evergreen Award Sustainability Innovation Award” at the awards ceremony of 2020 Sustainability
Innovation Summit and Evergreen Award hosted by Caijing in 2019;
“2019 Gold Prize of Excellent Cases of International Industrial Finance” award for the “Jifeng-Grammer”
merger in 2019;
second prize of “the Shanghai Financial Innovation Award” for issuance of SSE 10-year local government
bond ETF in 2019;
“Best Securities Firm” jointly warded by Eastmoney and Tiantian Fund in 2018;
“Company with Most Valuable Brand” at the International Development Forum for Chinese Listed
Companies and the “Golden Lion Award” Hong Kong Listed Companies Selection held by Sina Finance in
2018;
“2018 China Outstanding Futures Company Junding Award” and “2018 China’s Fixed Income Investment
Team” by Securities Times; and
“Best China Offshore Fund Company” and “Best Business Development Team” in Asia Pacific Region by
Asia Investor to Haitong International Securities in 2018.
The following chart sets out the Group’s simplified shareholding structure and key subsidiaries and affiliates as
at 31 December 2022.
Other A Share Other H Share
Top 10 Shareholders(1)
Shareholders Shareholders
53.53% 46.46% 0.01%
The Guarantor
100.00% 100.00% 51.00% 83.22% 100.00% 27.78% 100.00% 100.00% 100.00%
Shanghai
Haitong Shanghai Shanghai
Haitong HFT Haitong Fullgoal
Innovation Haitong Haitong Capital Weitai Zechun
Securities Investment International Fund
Securities Futures Co., Investment Property Investment &
Asset Management Holdings Management
Investment Ltd. Co., Ltd. Management Development
Management Co., Ltd. Limited Co., Ltd.
Co., Ltd. Co., Ltd. Co. Ltd.
Company Ltd.
100.00%
The Issuer
Note:
(1)
As at 31 December 2022, the top ten shareholders of the Guarantor are HKSCC Nominees Limited (26.09%), Shanghai Guosheng
(Group) Co., Ltd.. (6.60%), Shanghai Haiyan Investment Management Company Limited (4.86%), Bright Food (Group) Co., Ltd.
(3.63%), Shanghai Electric Holding Group Co., Ltd. (2.64%), Shenergy Group Company Limited (2.47%), China Securities Finance
Corporation Limited (1.98%), Shanghai Guosheng Group Assets Co., Ltd. (1.82%), Shanghai Jiushi (Group) Co., Ltd. (1.80%),
Shanghai Bailian Group Co., Ltd., (1.64%), among which, Shanghai Guosheng (Group) Co., Ltd. and its wholly-owned subsidiary,
Shanghai Guosheng Group Assets Co., Ltd., hold a total of 1,356.3275 million A Shares and H Shares of the Guarantor, representing
approximately 10.38% of the total share capital of the Guarantor. Save for Shanghai Guosheng (Group) Co., Ltd. (together with its
subsidiaries, the “Guosheng Group”), no shareholder directly held more than 5% of the shares of the Guarantor (excluding HKSCC
Nominees Limited). HKSCC Nominees Limited held the H Shares on behalf of the non-registered shareholders.
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Recent Developments
Issuance of Bonds
On 7 February 2023, Haitong Securities issued the first tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB2.5 billion and a term of two years and the first tranche of corporate bonds (type II) with a
total issue size of RMB3.0 billion and a term of three years.
On 3 March 2023, Haitong Securities issued the second tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB2.5 billion and a term of two years and the second tranche of corporate bonds (type II) of 2023
with a total issue size of RMB1.7 billion and a term of three years.
On 21 March 2023, Haitong Securities issued the third tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB3.3 billion and a term of two years and the third tranche of corporate bonds (type II) of 2023
with a total issue size of RMB2.7 billion and a term of three years.
On 21 April 2023, Haitong Securities issued the fourth tranche of corporate bonds (type I) of 2023 with a total
issue size of RMB2.0 billion and a term of two years and the fourth tranche of corporate bonds (type II) of 2023
with a total issue size of RMB4.0 billion and a term of three years.
On 20 April 2023, the Issuer issued the CNY4,000,000,000 3.40 per cent. guaranteed bonds due 2026 guaranteed
by Haitong Securities.
Business Milestones in the History of the Group
1988 In September, Haitong Securities (formerly known as Shanghai Haitong Securities Company
( )) was established.
1990 In November, the Group became one of the founding members of the Shanghai Stock
Exchange.
1992 In January, the Group started its B share business. In July, the Group was admitted as a
member of the Shenzhen Stock Exchange.
2005 In May, the Group was qualified by the SAC as one of the pilot innovative securities
companies.
2007 In July, its wholly-owned subsidiary Haitong Finance Holding (HK) Co., Ltd. (currently
known as Haitong International Holdings) was incorporated in Hong Kong, through which
the Group provides securities and futures brokerage, margin financing, securities lending,
corporate finance and advisory services and asset management products and services.
In July, its A Shares were listed on the Shanghai Stock Exchange with the stock code 600837.
2008 In January, the Group was approved by the CSRC as a QDII.
In April, the Group was permitted by the CSRC to provide futures IB business.
In July, the Group was approved by the CSRC as one of the pilot companies in direct
investment, and then in October, the Group incorporated Haitong Capital Investment, a
wholly-owned subsidiary, to develop the direct investment business.
2009 In December, through Haitong Finance Holding (HK) Co., Ltd. (currently known as Haitong
International Holdings), the Group acquired 52.86% of Taifook Securities (currently known
as Haitong International Securities), a company listed on the Main Board of the Hong Kong
Stock Exchange with stock code 665, and through a series of purchase and loan
capitalisation, the Group increased its equity interest to 61.78% as at 31 December 2016.
2010 In February, Haitong Futures qualified as one of the first companies to open accounts for
stock index futures trading.
In March, the Group qualified as one of the first PRC securities companies to participate in
the pilot programme of margin financing and securities lending.
In August, Taifook Securities (currently known as Haitong International Securities)
successfully launched the first offshore RMB fixed income fund in Hong Kong.
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In November, Taifook Securities was renamed as Haitong International Securities.
2011 In June, the Group applied to the CSRC to establish a subsidiary engaging in the investment
service of alternative financial products.
2012 In January, the Group pioneered the successful roll-out of the first RQFII product, and
became the first Chinese institution in Hong Kong to receive QFII and RQFLP qualifications
and the only Mainland-funded financial institution in Hong Kong to own all of the RQFII,
QFII and RQFLP qualifications in 2012.
In April, its H Shares were listed on the Main Board of the Hong Kong Stock Exchange with
stock code 06837.
In September, the Group was approved by the CSRC to manage funds of insurance
companies.
2013 In January, the Group became the first securities firm to conduct OTC business in the PRC
securities market.
In April, Haitong Capital (International) Investment Co., Limited, a wholly subsidiary of
Haitong International Holdings, was established with a registered capital of HK$10,000.0,
which is the platform to raise QFLP Funds overseas for Haitong Innovation Capital
Management Co., Limited, a subsidiary of Haitong Capital Investment. In June, the Group
was among the first nine securities firms to participate in the pilot programme of stock
pledge financing.
In July, the Group obtained approval from the CSRC Shanghai Branch for expansion of its
business scope to include financial products sales agent.
In September, Haitong International Holdings entered into a sale and purchase agreement
with UT Capital Holdings to acquire 100.0% equity interest in the UT Capital Group for the
expansion of its business in the field of financial leasing. The acquisition of the UT Capital
Group by the Group was completed on 15 January 2014.
2014 In January, the Group’s acquisition of the UT Capital Group was completed.
In August, the Group became one of the first few PRC securities firms admitted as members
of Shanghai Gold Exchange.
In March, Shanghai FTZ Branch was officially launched.
In November, Haitong International (BVI) Limited, a wholly-owned subsidiary of Haitong
International Securities, and Japaninvest Group plc (“Japaninvest”) reached an agreement,
pursuant to which Haitong International (BVI) Limited agreed to acquire the entire issued
and to be issued ordinary share capital of Japaninvest. The proposed acquisition values the
entire issued and to be issued ordinary share capital of Japaninvest at approximately
JPY2,878,200,000. Japaninvest provides unbiased, detailed and insightful pan-Asia equity
research, analysis and sales advice for the benefit of investing clients, in order to generate
superior long-term returns to shareholders. This acquisition was completed in March 2015.
In December, Haitong International Holdings entered into the Sale and Purchase Agreement
with Novo Banco, S.A. to acquire the entire issued share capital of BESI. Such acquisition
was completed in September 2015 and BESI was renamed to Haitong Bank thereafter and
was awarded as “2015 Best FIG Deal” by FinanceAsia.
In December, Haitong Securities entered into subscription agreements with seven
institutional investors, pursuant to which Haitong Securities conditionally agreed to allot and
issue, and the investors respectively conditionally agreed to subscribe for a total of
1,916,978,820 new H Shares. The issuance of 1,916,978,820 new H Shares was completed
in May 2015.
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2015 In January, Haitong Securities received the Notice on Admission of Haitong Securities Co.,
Ltd. as a Stock Options Trading Participant on the Shanghai Stock Exchange from the
Shanghai Stock Exchange, which approved the admission of Haitong Securities as a stock
options trading participant on the Shanghai Stock Exchange and the trading permission to
commence stock options brokerage and proprietary trading businesses by the Shanghai Stock
Exchange.
In February, Haitong Securities was approved to engage in stock options market making
business following receipt of the Approval relating to the Qualification of the Stock Options
Market Making Business of Haitong Securities Co., Ltd. from the CSRC.
In February, Haitong Securities was approved as a principal market maker in SSE 50 ETF
options contracts following receipt of the Notice relating to the Commencement of the SSE
50 ETF Options Market Making Business of Haitong Securities Co., Ltd. from the Shanghai
Stock Exchange.
In October, Haitong Securities was approved to conduct the interbank gold price asking
transactions through the Shanghai Gold Exchange following receipt of the Reply regarding
Approval of Conducting Interbank Gold Price Asking Transactions by Haitong Securities
Co., Ltd. from the Shanghai Gold Exchange.
2016 In April, Haitong Securities was approved to conduct the listing and transfer of non-public
issuance of short term corporate bonds of security company following receipt of the No
Comment Letter to Haitong Securities Co., Ltd. on the Listing and Transfer of Non-public
Issuance of Short-term Corporate Bonds of Security Company in 2016 from the Shanghai
Stock Exchange.
In November, Haitong Securities was approved as a trial securities company in Note Dealing
platform following receipt of the Notice on Preparing well for access to Note Dealing
platform from the PBOC.
2017 In January, Haitong Securities received the qualification for relevant business on tools
mitigating credit risk.
2018 In July, Haitong Securities obtained the qualification for secondary dealers for OTC options
business.
In December, Haitong Securities completed registration of Haitong International (UK)
Limited as the UK Cross-border Transfer Institution of Shanghai-London Stock Connect
GDR.
2019 In February, Haitong Securities obtained qualification for credit derivatives business.
In June, Haitong Securities obtained qualification for public issuance of financial bonds in
the national inter-bank bond market.
In June, UniTrust was successfully listed on the Main Board of the Hong Kong Stock
Exchange under the stock code of 01905, and raised gross proceeds of approximately
HK$2,322.4 million from its global offering.
In December, Haitong Securities obtained qualification for stock index option market
making business.
2020 In March, Haitong Securities obtained qualification for interest rate swap real-time
undertaking business.
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2021 In October, Haitong Bank, Macau Branch was officially launched.
In November, Haitong Securities became a member of Beijing Stock Exchange and obtained
the qualification as one of the first batch of institutions for establishment of a credit-
protected bond pledge-type repurchase business launched by China Securities Depositary
and Clearing Corporation Limited.
2022 In July, Haitong Securities was qualified to be Commodity Swap Business Primary Trader.
In November, Haitong Securities was granted Personal Pension Fund Sales Qualification.
In December, Haitong Securities was granted qualification for SSE Fund Connect market-
making business.
Competitive Strengths
The Group believes the following competitive strengths contribute to its success and distinguish the Group from
its competitors:
Full-service securities firm in the PRC with leading market positions across multiple business lines
The Group is one of the largest securities firms in the PRC. In 2018, the Group restructured its business lines
to primarily focus on five principal business lines in the PRC, including wealth management, investment
banking, asset management, trading and institutional client services, financial leasing and others. Each of these
businesses contributed 36.3%, 11.1%, 6.8%, 10.6%, 21.4% and 13.8%, respectively, to its total revenue, gains
and other income for the year ended 31 December 2022.
Starting from securities business, the Group has continuously expanded the scope of its financial products and
services and extended the boundaries of financial services through establishment and acquisition of professional
subsidiaries. The Group has developed into a financial service group with businesses covering wealth
management, investment banking, asset management, trading and institutional client services and financial
leasing. The Group’s wealth management business boasts a solid customer base; its investment banking business
has high market influence; the AUM of actively managed assets business increases steadily; the scale and profit
of its equity investment trading business ranks top in the industry and its research services business enjoys strong
market influence; its financial leasing business establishes an industry-leading position; and the performance
indicators of its Hong Kong business are in the forefront among all market players. The integrated financial
platform generates strong scale effect and cross-selling potentiality, which vigorously supports the business
development and enables comprehensive financing services for customers.
The diversified business model of the Group has allowed it to achieve sustainable growth. The wealth
management and asset management businesses have achieved good results and provided it with stable revenue
streams. Its penetration into China’s fast growing financial leasing business by acquiring the UT Capital Group
has facilitated the Group to diversify its sources of revenue, mitigate market volatility risk, provide a more
comprehensive service portfolio and better meet the diversifying financial needs from its institutional clients. In
addition, its investment banking and trading and institutional client services have served as additional growth
drivers. The Group believes its business model generates balanced revenue streams which provide sustainable
profits and strong growth prospects.
The Group believes its integrated business platform has allowed it to benefit from revenue and cost synergies
across different business lines and enhanced its capabilities to attract and retain customers by maximising
cross-selling opportunities and the sharing of business resources, which will eventually enable comprehensive
financing services for customers and help to increase the customer loyalty of the Group.
Strategically located branch network across the PRC with a substantial and stable customer base
The Group has an extensive nationwide branch network in the PRC. As at 31 December 2022, the Group had 337
securities and futures branches (including 301 securities branches and 36 futures branches) spanning across 30
provinces, municipalities and autonomous regions in the PRC, as well as branches, subsidiaries or offices in 15
countries and regions including Asia, Europe, North America, South America and Oceania operated through its
subsidiaries, Haitong International Securities and Haitong Bank.
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The branches are also strategically located. The Group is headquartered in PRC’s financial centre, Shanghai,
where the free trade zone is located. The Group first expanded into the Yangtze River Delta, Pearl River Delta
and Bohai Rim where high net worth customers and SMEs are concentrated. The Group also established branches
in less penetrated regions such as the north-eastern, central and western regions of the PRC. While expanding
its traditional branch network, the Group has also developed a web-based platform, which its customers can use
to trade online. In addition, its customer service representatives at its branches offer real-time advisory services
to its customers. This has provided a solid foundation for attracting new customers and expanding its businesses.
For instance, as a leading securities group based in Shanghai and listed on both domestic and overseas markets,
the Group is expected to obtain the support from Shanghai government. The Group will also benefit from the
development of Shanghai’s position as international financial centre and FTZ. The Group believes that its
balanced geographic coverage of branches in the PRC has enabled it to benefit from the rapid economic growth
and accelerating urbanisation in certain developing regions.
The Group believes its strategic geographic coverage has enabled it to provide localised services to its customers
and capture growth potential and cross-selling opportunities among multiple business lines. For example, the
Group has identified investment banking opportunities from its numerous SME customers covered by its branch
network. The extensive branch network and localised services of the Group also support its distribution of
differentiated and value-added products and services, such as its wealth management products.
By leveraging its extensive located nationwide branch network and a strategic international presence, the Group
has also built a large and stable customer base. As at 31 December 2022, the Group had over 21 million domestic
and overseas customers.
A pioneer in the PRC securities industry for offering new businesses
In recognition of its strong capital position, effective risk management and internal controls, and proven
execution capabilities, the Group is frequently designated by the regulatory authorities as one of the first few
securities firms to participate in pilot programmes for various new businesses in the PRC securities industry and
have established leading market positions in new businesses, for example, recently:
In March 2020, the Group obtained qualification for interest rate swap real-time undertaking business;
In 2021, the Group became one of the first batch of members of Beijing Stock Exchange and obtained the
qualification as one of the first batch of institutions for establishment of a credit-protected bond pledge-type
repurchase business launched by China Securities Depositary and Clearing Corporation Limited;
In 2021, the Group obtained the qualification for pilot in fund investment advisory business and the
qualification for infrastructure public REITs innovative business;
In 2021, the Group was approved to become a clearing member of the securities and derivatives market of
Singapore Exchange (SGX) and the depository agent of The Central Depository (Pte) Limited (CDP) of SGX,
becoming the first Chinese financial institution to obtain the full membership of SGX;
In July 2022, the Group was qualified to be Commodity Swap Business Primary Trader;
In November 2022, the Group was granted Personal Pension Fund Sales qualification; and
In December 2022, the Group was granted qualification for SSE Fund Connect market-making business.
The Group also actively promoted the implementation of innovations advocated by the regulatory authorities. In
2022, the Group was one of the first institutions to obtain various qualifications launched in the industry,
including the qualification of the main market maker of CSI 1000 stock index options and SSE 50 stock index
options on the CFFEX, the qualification of the main market maker of CSI 500 ETF options on the SSE, the
qualification of the main market maker of ChiNext ETF options, CSI 500 ETF options and SZSE 100 ETF
options on the SZSE, the qualification of first-class dealer for the commodity exchange business on the SHFE
and the membership of the Guangzhou Futures Exchange. Moreover, the Group was included in the list of private
pension fund sales institutions and the pilots on capital market fintech innovation (Shanghai). The Group also
obtained the qualification of Class B General Clearing Members and the qualification for net settlement of bonds
and credit default swap proprietary liquidation on the Shanghai Clearing House, qualification of market maker
under the SSE Fund Connect and other qualifications.
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In addition, the Group is the first domestic security firm with a listed subsidiary in Hong Kong, the first domestic
security firm holding financial leasing business and the first PRC security firm to acquire an investment bank
headquartered in Europe. The Group also participated in the first batch of China fund management companies.
The Group is also a founding member of SAC, the first security firm qualified to the custody business of
securities investment fund, one of the first few security firms qualified to on-line transaction, one of the first few
qualified sponsors, one of the first few fund evaluation agencies, one of the first few security firms qualified to
entrusted asset management business and one of the first few security firms obtaining FOF fund approval.
The Group believes its substantial customer base, strong capital position, extensive branch network, strong
cross-selling and execution capabilities have enabled it to gain a first-mover advantage in offering new
businesses. In addition, the Group believes its integrated business platform has enabled it to expand its new
businesses quickly. In recent years, the Group has pioneered in product innovation, for example:
it has successfully issued the first domestic renewable corporate bond, the first super long-term bond and the
first project revenue bond in China;
it has successfully issued the first credit asset-backed securitisation product with credit card instalment
bonds as underlying assets in the inter-bank market in China;
it is among the first-tier dealers in the interest rate swap market and has steadily promoted the development
of equity return swap;
it is among the first batch of companies who obtained the qualification for piloting margin financing and
securities lending business in the STAR Market; and
it has successfully issued the first “green + rural revitalization + ensuring energy supply” bond in China.
The Group believes that its leadership in new businesses could enable it to further expand its market share in the
traditional securities businesses. The Group expects the CSRC to continue to launch pilot programmes and
encourage the introduction of new businesses in the PRC securities markets. The Group believes it is
well-positioned to capture future market opportunities by leveraging its leading market positions in multiple
business lines and its first-mover advantage in new businesses.
Forward-looking overseas layout to generate great synergies and first-mover advantages
The Group has established an industry-leading international business platform through the acquisition and
consolidation of Haitong International Securities and Haitong Bank, the establishment of Shanghai FTZ branch,
and acquired the first-mover advantages in the Asian-Pacific region, as well as the forward-looking strategic
reserve in Europe and America.
Haitong International Securities is one of the leading local full-service securities firms in Hong Kong and an
important platform for the Group to implement the “Belt and Road” initiative and the Guangdong-Hong
Kong-Macao Greater Bay Area strategy. As a pioneer in cross-border Renminbi business and being able to
capture the abundant business opportunities from financial market reforms such as Renminbi internationalisation,
exchange rate reform, interest rate liberalisation and capital accounts liberalisation, Haitong International
Securities is the first financial institution in Hong Kong to successfully launch the Renminbi-denominated and
settled public fund in 2010 and is among the first batch of financial institutions which received RQFII
qualification in 2012. Haitong International Securities maintained its leading position in Hong Kong, with its
principal businesses maintaining strong market competitiveness and it completed 30 equity financing
transactions in the Hong Kong capital market, ranking third among all the investment banks in Hong Kong in
2022. In addition, Haitong International Securities was included in the FTSE4Good Index Series due to its
outstanding ESG performance and ranked top five in terms of governance scorings in the global financial
industry.
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In September 2015, the Group completed its acquisition of the entire issued share capital of BESI and renamed
it to Haitong Bank. Haitong Bank is an important part of the Group for deepening the Group’s globalisation
strategy and an important platform for the Group to implement the “Belt and Road” initiative. Haitong Bank
specializes in local market in the European Union and South America with over 20 years’ experience. With full
banking licenses, Haitong Bank is committed to developing the cross-border business cooperation between China
and Europe as well as China and Latin America while supporting its extensive coverage of local business, with
a focus on three key business areas including corporate banking, investment banking and asset management. In
December 2021, Haitong Bank, Macau Branch was officially opened, marking another important step forward in
the Group’s globalisation strategy.
The Group’s Shanghai FTZ branch, as one of the first securities institutions participating in the free trade
accounting unit system of the Shanghai FTZ, became the first PRC securities firm that completed the
cross-border financing project under FT. In 2022, Haitong Securities, as the global coordinator, assisted Shanghai
Lingang Economic Development (Group) Co., Ltd. ( ( ) ) in its successful issuance
of the global first green dual-currency FTZ bonds (Mingzhu Bonds), which was selected for the 11th Batch
Financial Innovation Examples of the Shanghai Pilot Free Trade Zone ( ).
In addition, Haitong Securities also assisted Bank of Communications Financial Leasing Co., Ltd. in successfully
issuing the first national financial institution ESG FTZ Renminbi bonds (Mingzhu Bonds).
These market leading, well-established and multi-jurisdiction international business platforms help the Group
seize the opportunities for the growing cross-border businesses, meet customers’ demands for cross-border
business and improve the Group’s international influence.
Prudent corporate governance, effective risk management and internal control systems and stable net capital
management
Upholding the operational philosophy of “pragmatic, pioneering, steady and excellent” and the risk control
philosophy of “prudence and even conservativeness”, the Group has successfully navigated through multiple
market and business cycles, regulatory reforms and industry transformations and developments in the past 30
years. Among the Chinese securities firms established in 1980s, the Group is the only largescale securities firm
that has been continuously operating under the same brand without state-owned capital injection or being
acquired or restructured. The Group has effectively implemented a company-wide comprehensive risk
management system to robustly implement the requirements for overall risk management and to effectively
manage market risks, credit risks, liquidity risks and operational risks. The Group has also established effective
risk isolation mechanism and appropriate precautionary mechanism across its business lines to prevent potential
conflicts of interests. In addition, the Group has established an independent and centralised internal audit and
compliance system to effectively monitor and supervise the compliance, authenticity, completeness, and
effectiveness of its operations and transactions.
As a public company listed in both Mainland China and Hong Kong, the Group has been operating in strict
accordance with laws and regulations and regulatory requirements of the two jurisdictions where it is listed and
has maintained effective and transparent corporate governance measures as required by the Shanghai Stock
Exchange and the CSRC. The Group has established a wide risk management system to robustly implement the
requirements for overall risk management so as to effectively manage compliance risks, market risks, credit risks,
liquidity risks, operation risks and reputation risk. The Group has established and improved the compliance
management system and organizational system in accordance with the regulatory requirements, continuously
strengthened the performance of compliance review, compliance monitoring and compliance inspection functions
to ensure and facilitate the Group’s continued compliance and steady development. Meanwhile, the Group has
always adhered to the work principle of taking risk prevention as its first priority, and strictly adopted relevant
measures to control the risks of money laundering and terrorism financing in accordance with anti-money
laundering laws and regulations. Besides, the Group has also carried out effective risk isolation mechanism and
appropriate precautionary mechanism across the business lines to prevent potential conflicts of interests. In
addition, the Group has established an independent and centralized internal auditing and compliance system to
supervise the authenticity, integrity and effectiveness of various operations and transactions.
In addition, the Group has no controlling shareholder owning more than 30% of its total outstanding Shares as
at 31 December 2022. Such shareholding structure allows its board of directors and senior management team to
exercise independent judgment and maintain a high level of professionalism, with a view to maximising its
corporate value in the best interest of all shareholders.
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The Group adheres to net-capital-focused governance policies and ensures satisfaction of regulatory
requirements for each risk indicator. The Group also aims to ensure adequate capitalisation and structure to
satisfy requirements for its strategic development and facilitate the healthy and efficient development of the
Group’s operations. Meanwhile, via stable net capital management, the Group optimizes its structure and
improves its capital allocation mechanism by taking prudent management, liquidity and profitability into
consideration, maximizes effective capital usage and satisfies shareholders’ interests.
The Group adopts several approaches to achieve stable net capital management. Firstly, the Group optimizes
capital allocation in each business line based on its development strategies and overall risk appetite. The Group
also makes reasonable adjustments to its business structure and customer structure through capital allocation to
improve capital efficiency. Secondly, the Group makes decision by balancing various factors such as business
development, regulatory requirements and shareholder returns. The Group also develops forward- looking capital
management plans. Besides, the Group adopts effective and dynamic management of capital amount and
structure, using optimized capital structure to reduce capital cost and improve capital utilization efficiency.
Thirdly, the Group leverages on equity and bond markets to supplement capital with flexibility in choosing
capital replenishment mechanism and timing. The Group has also established diversified and dynamic funding
raising channels through onshore and offshore markets for capital replenishment. Fourthly, the Group’s capital
utilization and leverage are balanced, with optimized debt structure, strengthened capital utilization planning and
strictly enforced financial settlement disciplines.
The Group also maintains reasonable asset liquidity and has established a multi-level liquidity reserve. The
Group has established an emergency response mechanism, providing liquidity risk warning mechanism for
improved pre, concurrent and post-control.
Enhancing financial strengths with outstanding business performance
From 2007 to 2022, the Group seized the market opportunities and rapidly enhanced and attained its capital
strength through several strategic equity financing and bond financings, including A-share and H-share listing
and secondary offering. In 2022, the Group seized the market opportunities and completed multiple debt
financings, raising over RMB50.0 billion through domestic fundraising activities including issuance of corporate
bonds, subordinated bonds and beneficiary certificates, which enhanced the Group’s liquidity management
capability and risk prevention and control capability. Besides, the Group has also been actively expanding
overseas financing channels to ensure the healthy and orderly development of overseas business. Adequate
capital has laid a solid foundation for the Group’s business transformation and upgrade, satisfying domestic and
overseas customers’ diversified needs for financial services as well as continuously improving its service
capability for the real economy.
As at 31 December 2020, 2021 and 2022, the total assets and net assets of the Group amounted to RMB694.1
billion, RMB744.9 billion, RMB753.6 billion and RMB168.1 billion, RMB177.8 billion and RMB177.6 billion,
respectively.
For the years ended 31 December 2020, 2021 and 2022, the total revenue, gains and other income of the Group
was RMB54.3 billion, RMB57.8 billion and RMB42.0 billion, respectively.
Experienced and stable management team with a highly proficient professional workforce
The success of the Group is attributable to the sound leadership of its directors and senior management. The
majority of the Guarantor’s directors, including its chairman, and members of its senior management, including
its general manager, deputy general manager, chief financial officer and general compliance officer, have an
average of 20 years of experience in the PRC financial and securities industries. Most of them have served the
Group for over ten years. The Group also has a large number of corporate financing and investment bankers with
profound professional knowledge and rich practical experience, in particular in the fields of sponsor issuance,
corporate merger and acquisition, and financial advisory.
The Group believes that the strategic vision of its senior management team has distinguished it from its
competitors and has allowed it to capture business opportunities arising from product innovation and
globalisation of the PRC securities industry. The Group has a highly proficient professional workforce. As at 31
December 2022, more than 90% of its employees held a bachelor’s degree or above.
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The Group believes that the retention of key employees is attributable to its well-recognised brand name,
business prospects, successful recruitment and customised professional training programmes.
Technology-leading digital transformation at an accelerated phase
The Group has adhered to the strategy of “development driven by technology”, and is the first securities company
in the industry with renowned international certifications in four areas, including operation and maintenance
service system, information security system, software research and development system and software testing
system. The Group continues to maintain its leading position in the industry in terms of the investment in
technologies, and aims at building the “Digital Haitong 2.0” featuring “agile, platform-based, smart and
ecological” characteristics. The Group continuously promoted the in-depth application of new financial
technologies, insisted on self-reliance and controllability of key technologies, led the innovation of various
technologies in the industry, and explored and advanced the digital transformation of the industry.
Firstly, the digital base capability of the Group is constantly improving. For Zhangjiang Hi-Tech Park, the Group
kept up with the upgrading pace of the industry, actively practised the ESG concept, implemented the “Dual
Carbon” strategy, adopted energy-saving design and advanced process technologies, strived to build a green and
low-carbon park, and became the first securities company in the industry to use photovoltaic energy and
successfully commence operation using this energy source. In addition, the Group’s independently developed
next-generation core trading system for margin trading was fully put into operation. By innovating and
optimising the technical architecture, the Group greatly improved the performance of the trading system and
comprehensively improved customer trading service standards.
Secondly, the Group’s efforts devoted to empowering business innovation have achieved remarkable results. For
example, the Group released the version for the elderly and the 9.0 major version of its one-stop Internet financial
platform “e-Haitong Cai (e )” app providing excellent product and service experience for customers. The
number of users who installed the “e-Haitong Cai (e )” app exceeded 43.00 million with the number of
average monthly active users reaching over 5.30 million, and it remained among the industry’s first echelon. The
Group’s one-stop OTC derivatives business platform “e-Haitong Yan (e )” integrated hedging transactions,
valuation and pricing, contract settlement and other functions and covered various business types including
equity, fixed income, commodity-based OTC options and return swaps, and it opened up the south-to-north
transaction channels and provided overseas and domestic investors with diversified and professional cross-border
investment transactions and hedging instruments. The Group’s integrated intelligent trading platform
“ShareEBook (e )” integrated the functions of high-speed trading and high-speed market information,
which improved its capability to serve trading using algorithms and provided a basket of comprehensive
transaction solutions for professional investors.
Thirdly, the Group has continuously enhanced its technological innovation capability. The Group undertook 22
projects for the Ministry of Science and Technology, Shanghai State-owned Assets Supervision and
Administration Commission in 2022, and obtained a sub-project under the national key R&D programme of the
Ministry of Science and Technology. In addition, the Group also obtained a total of 15 national patents and 68
software copyrights, and ranked in the forefront of the industry. The Group issued the first digital transformation
monograph of domestic security companies, namely the Digital Transformation of Security Companies (
), and proposed a general systematic framework for securities companies’ digital
transformation in a forward-looking manner, which provides references and samples for the technological
development and digital transformation of domestic securities companies.
Business Strategies
Under the background of transformation, the Group plans to continue adhering to customer focus, focusing on
intermediary businesses such as wealth management, investment banking and asset management as core
businesses; developing capital intermediary business and investment business as the wings which will draw upon
conglomeration, internationalisation and informatisation as the driving force; reinforcing the four “pillars”
including compliance and risk management, talent, IT and research. Meanwhile, the Group will enhance its
capability building in five areas including capital and investment management, investment banking underwriting
and sales pricing, assets management, institutional brokerage and sales transaction and wealth management in
order to build an intelligent Haitong. With the mission of developing a world-class investment bank, the Group
is committed to transforming Haitong into a leading domestic and globally influential modern financial services
enterprise.
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Further enhance its leading market position and profitability with focus on intermediary businesses such as
wealth management, investment banking and asset management as core businesses
The intermediary businesses such as wealth management, investment banking and asset management is one of
the Group’s core businesses with stable revenue streams and considerable growth potential. With the deregulating
of the PRC capital market and, as a result of which, foreign investors’ involvement in it, the Group believes
value-adding wealth management business will be the growth engine of the PRC capital market. In addition, with
the development of Internet finance, an increasing number of individual investors are flooding the market, which
will be another growth engine of the PRC capital market.
With an aim to promote the overall transformation of brokerage business to wealth management business, the
securities and futures brokerage business was restructured as the wealth management business together with
investment advisory services, financial planning services, and financing business services in 2018. The Group
believes its securities and futures brokerage business will continue to be a major source of revenue and will
continue to enhance the core capacities of wealth management business of securities firms, such as investment
advisory services, trading services and product sales based on asset allocation and. The Group will continue to
focus on serving retail customers, institutional clients and high net worth customers, and expanding its futures
and cross-border brokerage businesses. The Group plans to enhance its leading market position and profitability
in the securities and futures brokerage business by improving its market share, increasing customer loyalty and
enhancing pricing power through the implementation of the following strategies:
further improving customer segmentation by offering tailor-made investment solutions and differentiated
products and services, such as investment advisory services, wealth management services, futures IB
services and research reports support, to its high-end retail customers, institutional clients and high net worth
customers;
increasing resource investments in Internet finance to constantly enhance the customer base, studying and
formulating the development plan of Internet finance and improving the business procedures through Internet
to popularise the awareness of Internet and to improve the concept of services;
leveraging Haitong International Securities’ presence in Hong Kong to develop cross-border brokerage
businesses in the PRC and overseas markets by offering comprehensive financial products and services to
overseas customers to further expand its customer base while providing its domestic customers with access
to international markets so as to further strengthen its competitiveness; and
capturing market consolidation and acquisition opportunities of selected securities firms in the PRC to
enhance its geographic reach and market share.
Maintain the growth momentum of its investment banking business and further integrate its business platform
The investment banking business of the Group grew rapidly in recent years, and the Group believes it has
significant growth potential. In addition, the rapid growth of its investment banking business will substantially
enhance its brand name and provide cross-selling opportunities across different business lines. The Group plans
to strengthen its market leadership in its investment banking business by implementing the following strategies:
enhancing its customised investment banking solutions to clients, in particular those in the PRC financial,
technology and cultural industries, while strengthening its coverage of both large corporations and SMEs.
The Group covers large corporations by industry sectors and provide localised services to SMEs, including
private enterprises;
strengthening its debt underwriting capabilities and financial advisory services to capture the growth
potential of debt financing and merger and acquisition activities in the PRC capital markets, and increase
their revenue contribution;
further developing its equity and debt capital markets divisions to enhance its pricing and distribution
capabilities;
integrating the back office operations of equity underwriting, debt underwriting and financial advisory
services to improve operating efficiency; and
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maximising synergies between its PRC and overseas business platforms to capture new business
opportunities, such as the increasing offshore fund raising by PRC enterprises and the potential launch of the
international board in the PRC, and to capitalise on potential cross-selling opportunities.
Strategically expand its asset management business to provide comprehensive product offerings to meet
increasing and diversifying customer demands
The Group believes its asset management business is a strategically important business with long-term growth
potential and will allow it to improve its revenue composition and more effectively serve its retail and
institutional clients which have sizable investment assets. Investment banks in China derive their revenue mainly
from brokerage, trading, investment banking and asset management businesses. The Group believes that with the
development of the PRC asset management industry, institutional investors such as investment banks will play
an increasingly significant role, and with the deregulation of the PRC asset management industry, the PRC asset
management industry will enjoy more growth potentials and more room for innovation.
The Group will leverage its extensive branch network and substantial customer base to capture potential
cross-selling opportunities between its asset management business and other business lines and to further develop
its asset management products and services in order to increase the range of its product suites, its AUM and
operating income.
The Group plans to implement the following strategies to broaden its product and service offerings, enhance its
ability to design new and customised products, integrate its distribution channels and improve the quality of
customer service:
continuing to enhance HFT Investment Management and Fullgoal Fund Management’s brand name and
expediting the development of product distribution channels; and
positioning Haitong Asset Management as a platform for both business innovation and investors-and-
financiers’ connection, and Haitong Asset Management will adopt an optimised investment decision-making
process and an enhanced performance appraisal system with market-driven incentive schemes to attract and
retain professionals.
Continue to expand and promote new businesses and products with high growth potential
The development of new businesses is the key to the continued growth and successful transformation of the
Group. These new businesses will enhance its service quality and customer loyalty, strengthen its competitive
advantage in traditional businesses and contribute to additional revenue growth. The Group will keep abreast of
market dynamics and continue to expand and compete through new and differentiated products and services with
high growth potential.
In 2020, the Group obtained qualification for stock index option market making business; in 2021, the Group
obtained qualification for interest rate swap real-time undertaking business and was qualified establishment of
a credit-protected bond pledge-type repurchase business; and in 2022, the Group was qualified to be Commodity
Swap Business Primary Trader and obtained qualification for Personal Pension Fund Sales and SSE Fund
Connect market-making business. Going forward, the Group will continue to seek opportunities in new
businesses in response to changes in PRC regulatory requirements, market trends and customer demands, and to
capture new business opportunities, such as the potential launch of the international board, margin and securities
refinancing and financial derivatives in the PRC, by capitalising on its strong capital position, integrated business
platform, innovation, execution and risk management capabilities.
Actively pursue its internationalisation strategy to capture cross-border opportunities
The internationalisation strategy of the Group forms an important part of its overall business strategy. The Group
aims to implement a customer-focused strategy to satisfy its customers’ increasing demands for cross-border
financial services and further improve its services to its customers in the PRC and overseas, thereby optimising
its revenue composition and enhancing its brand recognition overseas.
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By leveraging Haitong International Holdings as the flagship of its overseas business, the Group plans to expand
the scale of its overseas operations and business platform through organic growth and/or acquisitions. The
criteria for overseas acquisition targets of the Group include: (i) adequate presence in overseas local markets; (ii)
complementary business and synergies with its business; (iii) ability for it to exercise control in the target; and
(iv) likelihood to strengthen its existing customer base, distribution network and professional expertise. In March
2015, Haitong International Holdings completed the acquisition of the entire issued and to be issued ordinary
share capital of Japaninvest, which is expected to strengthen the Group’s research service capability with regard
to international institutional investors. In September 2015, Haitong International Holdings completed the
acquisition of the entire issued share capital of BESI and renamed it to Haitong Bank, which is expected to
expand the Group’s international business presence in mature markets in Europe and America and emerging
markets in South America and Africa and the Group’s capability of providing global services.
The Group also intends to implement the following strategies with respect to its existing international platform:
maintaining and strengthening Haitong International Securities’ leading position in Hong Kong market and
taking advantage of its proximity to overseas markets, its sales network and its international customer base;
continuing Haitong International Securities’ business innovation and client-focus services;
developing cross-border business and realising synergies between its PRC and overseas businesses,
especially in the areas of investment banking, asset management, securities brokerage and research. For
example, its PRC and overseas businesses can refer investment banking, assets management and securities
brokerage customers to each other and share research resources.
Strengthen the risk management systems, internal controls, IT capabilities, research capabilities and talent
management to support its business operations
The Group believes an effective risk management system, internal controls, research and IT capabilities and
talent management are essential to developing a sustainable business and maintaining its market leadership. The
Group plans to strengthen its overall risk management and regulatory compliance by implementing the following
strategies:
enhancing its internal control and risk management framework with a focus on material areas and critical
sectors with consist improvement of all systems, policies and processes, to ensure no deficiencies in system
design or blind spots in control system in practice;
strengthening its overall risk management capabilities through the construction of risk management system
and expanding of the scope of information control in accordance with relevant laws and regulations;
carrying out daily monitor and information report and continuously assessing the implementation of system
to perfect and improve risk control and management strategies in a timely manner;
absorbing new knowledge and new concepts of internal control management, revising the internal control
evaluation manual, and improving the efficiency and effectiveness of internal control; and
strengthening the promotion and training on the standard for internal control to further upgrade the level of
internal control and risk management.
The Group recognises the importance of a strong research team to the development of its principal business lines.
The Group will continue to enhance its research capability by:
expanding its research team and enhancing its market recognition;
upgrading research knowledge management and database infrastructure; and
increasing its research coverage for PRC-listed companies and developing its overseas research capabilities
in a focused manner.
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The Group also plans to devote more resources to enhance its IT systems in order to provide efficient, secure and
stable technology services to support its business operations. The Group plans to strengthen its IT systems by
implementing the following strategies:
conducting a full review of its IT infrastructure when the Group sees fit and strengthening its IT
administration and risk management capabilities;
further strengthening the development of its IT infrastructure; and
upgrading critical IT applications relating to its operational and management functions when the Group sees
fit.
The success of the Group, to a large extent, depends on its ability to attract, motivate and retain professional and
experienced personnel. In order to maintain its competitive advantage in the marketplace, the Group intends to:
continue to attract and retain qualified professionals, such as senior management, licensed sponsor
representatives and experienced investment managers with international vision;
continue to focus on recruiting and cultivating the technical expertise and industrial knowledge of its
workforce, provide training and development programmes to enhance the knowledge and capability of its
professionals, and create a supportive culture that promotes personal and professional development; and
promote a merit-based compensation system across all business lines and continue to support and recognise
the importance of a market-driven compensation system that rewards performance and results.
The Business and Operations of the Group
The Group provides a comprehensive range of financial products and services domestically and overseas. The
principal business segments of the Group comprise wealth management, investment banking, asset management,
trading and institutional client services and financial leasing. The following table sets forth the revenue of each
business segment of the Group for the years ended 31 December 2020, 2021 and 2022:
Year ended 31 December
2020 2021 2022
(RMB in (RMB in (RMB in
millions) % millions) % millions) %
Wealth management 15,995.7 29.5 17,491.5 30.3 15,253.3 36.3
Investment banking 6,080.2 11.2 5,715.9 9.9 4,651.2 11.1
Asset management 4,201.0 7.7 4,148.9 7.2 2,858.1 6.8
Trading and institutional client
services 14,449.1 26.6 15,667.3 27.1 4,464.9 10.6
Financial leasing 8,361.7 15.4 8,877.6 15.3 8,973.6 21.4
Others 5,189.5 9.6 5,908.4 10.2 5,779.1 13.8
Total 54,277.2 100.0 57,809.6 100.0 41,980.2 100.0
Wealth Management
Overview
Wealth management mainly refers to the provision of comprehensive financial services and investment solutions
to retail and high-net-worth customers, including retail brokerage business, internet finance, sales of financial
products, future business, and financing business such as margin financing, securities lending and stock pledge.
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As at 31 December 2022, the Group has 337 securities and futures branches (including 301 securities branches
and 36 futures branches) spanning across 30 provinces, municipalities and autonomous regions in the PRC,
through which the Group provides comprehensive financial services and investment solutions to retail and
high-net-worth customers, including securities and futures brokerage services, investment advisory services,
financial planning services, and financing business services such as margin financing, securities lending, and
stock pledge.
The Group has been continuing to enhance the core capacities of wealth management business, such as
investment advisory services, trading services and product sales based on asset allocation, with an aim to promote
the overall transformation from the brokerage business to the wealth management business. For the year ended
31 December 2022, the trading volume of stocks and funds of the Group amounted to RMB17,062.9 billion,
representing a year-on-year decrease of 18.2%. As at the end of December 2022, the total number of customers
in the wealth management business was over 17.0 million (excluding dormant accounts), representing an increase
of 6.9% compared with that at the beginning of the year. The Group’s wealth management business mainly
comprises retail brokerage business, sales of financial products and futures business.
Retail brokerage business
In the retail brokerage business, the Group continues adopting a customer-centred approach and implementing
solid marketing and intensified services, to effectively improve the market competitiveness of the branches of
the Group. The Group deeply explored customer demand and built a customer-centric, wealth management
transformation-oriented, multilevel customer service system, focusing on information, products, investment
research, investment advisory and intelligent apps. The Group provided comprehensive financial solutions to
wealth management customers and institutional clients through the platforms of “e-Haitong Cai” (e ) and
“ShareEBoook” (e ).
The Group accelerated the reform of its branches and outlets. As at the date of this Offering Circular, its
comprehensive innovation branches, including the Shanghai Pudong Branch, the Shanghai Lingang Branch and
the Suzhou Branch, have commenced operation. The branches of the Group achieved an aggregate profit of
RMB3.34 billion in 2022, of which 11 branches contributed a profit of over RMB100 million and eight branches
contributed a profit of over RMB50 million.
The Group strengthened the construction of its digital financial platforms. The Group released the version for the
elderly and the 9.0 major version of the “e-Haitong Cai (e )” app, which precisely identifies the
differentiated needs of its customers and builds a multi-layer customer service system. As at 31 December 2022,
the number of users who had installed the “e-Haitong Cai (e )” app exceeded 43.00 million with the
number of average monthly active users reaching over 5.30 million.
In addition, the Group established a service system for strategic customers and enhanced its cooperation with
local governments and industrial parks. As at 31 December 2022, the Group has signed strategic cooperation
agreements with over 40 local governments and large enterprises. The Group developed an all-round investment
advisory service system. It officially launched “Ying Investment Advisory ( )”, the featured service brand,
and introduced six services for asset allocation strategy, thematic investment, automatic investment plan in funds,
and medium and low risks trade, covering investment research and service on stocks, bonds, funds and ETFs,
achieving comprehensive upgrading in various dimensions such as the content system, brand, professionalism,
experience and promotion channels. The Group built its brand for private banking services by integrating its
resources in investment banking, investment and overseas high-net-worth customer resources, seizing the
development opportunities in public REITs and diversifying the key asset allocation toolkits for customers, to
provide private banking customers with one-stop integrated private banking services spanning financing to
investment and covering both personal and corporate businesses.
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The sales of financial products
The financial products the Group sells include cash management products, quantitative hedging products and
private equity trust products. The Group continues to improve its financial products system and further promote
its development of wealth management business. As at 31 December 2022, the average daily penetration of the
Group’s financial products increased to RMB121.4 billion, representing a year-on-year increase of 23.9%. In
particular, the average daily penetration of products (other than monetary funds) was RMB82.9 billion,
representing a year-on-year increase of 23.3%. The average daily penetration of publicly offered products was
RMB77.5 billion, representing a year-on-year increase of 51.1%; and the penetration of ETF products was
RMB22.4 billion, representing a year-on-year increase of 431.2%. Furthermore, the Group focused on promoting
the products offered by public funds under the broker settlement model ( ) and leading privately offered
quantitative funds, to continuously enhance customer recognition of the financial products of the Group and the
Group’s brand influence. In November 2022, China launched its first Private Pension Scheme in 36 cities or
regions, and the Group was successfully granted the Personal Pension Fund Sales Qualification, becoming one
of the first batch of qualified companies for the sale of private pension funds business. As at 31 December 2022,
the Group has completed the launch of 126 private pension funds across 40 fund management companies, and
generally achieved the full coverage of private pension funds products.
Futures business
The Group provides futures brokerage services through its subsidiary, Haitong Futures, which is a member of the
Shanghai Futures Exchange, the Zhengzhou Commodity Exchange, the Dalian Commodity Exchange, the China
Financial Futures Exchange, and Shanghai Gold Exchange. In 2021, Haitong Future obtained the fund
consignment business licence to enable it to carry out fund distribution business. As at 31 December 2022, there
were 36 futures branches) spanning across 30 provinces, municipalities and autonomous regions in the PRC.
The Group steadily developed its futures business and achieved the financial results of a new historical high in
recent years. For example, in 2022, the trading volume of futures contracts under its brokerage amounted to
RMB30.5 trillion (without double counting) with a market share of 5.7%. As at 31 December 2022, its client
equity amounted to RMB54.1 billion, representing a year-on-year increase of 7.4%. In addition, Haitong Futures
successfully applied for membership of the Guangzhou Futures Exchange, smoothly promoted the
implementation of its Internet finance business and actively explored new tracks for the brokerage business.
Financing business
Based on the development strategy of “stabilise the size, adjust the structure and reduce the risk”, the Group
actively combed its existing businesses, and optimised its capital intermediary business layout through enhancing
project review, promoting special fund account management, reinforcing risk monitoring, and strengthening
capital gain management. The financing business segment exhibited a stable and slightly reduced size. As at the
end of December 2022, the total balance of the financing business of the Group reached RMB88.8 billion, of
which the balance of stock pledge business was RMB27.4 billion, representing a decrease of RMB3.9 billion
from the beginning of the year, and the balance of margin financing and securities lending business was
RMB61.2 billion, representing a decrease of RMB12.8 billion from the beginning of the year. In addition, the
Group actively explores new business opportunities and is among the first batch of companies that obtain the
qualification for piloting margin financing and securities lending business in the STAR Market.
Financing business of the Group mainly includes margin financing and securities lending, stock repo trading and
stock pledge financing.
Margin financing and securities lending
In March 2010, the Group was authorised by the CSRC as one of the first six PRC securities firms to pilot a
margin financing and securities lending business. Securities lending allows its brokerage customers to borrow
securities to take advantage of potential short selling opportunities in the markets.
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The Group has adopted strict criteria for acquiring new customers and established a rigorous risk management
system in its margin financing and securities lending business in accordance with applicable laws, regulations
and regulatory guidelines. The Group determines the credit limit the Group extends to its customers based on
various factors, such as the value of their total assets maintained with the Group and their creditworthiness. The
Group determines a customer’s eligibility for a new transaction based on the credit line available to the client
and the balance of the client’s deposits. The Group has also established a margin call risk control mechanism
through which it monitors the value of its customers’ collateral on a real-time basis.
As at 31 December 2022, the Group has a balance of RMB61.2 billion of margin financing and securities lending
business, compared to RMB73.9 billion as at the end of 2021.
Stock repo trading and stock pledge financing
In October 2011, the Group was authorised by the CSRC as one of the first three PRC securities firms to pilot
a stock repo trading programme. The stock repo trading business offers short-term financing services to holders
of listed companies’ shares, which shareholders prefer not to lose ownership on a permanent basis. The Group
agrees with such customers to purchase from such customers their securities at an agreed price and sell such
securities back to such customers at a later time at certain agreed price. The business facilitates customers with
needs for short-term financing services in that it’s easy to purchase and sell with no requirement of prior
notification, and the interests are charged on a daily basis. The Group generates commission and interest income
from such business.
In June 2013, the Group was authorised by the CSRC as one of the nine PRC securities firms to pilot a stock
pledge financing programme. The stock pledge financing business offers financing services to customers by
lending funds to customers who guarantee the loan by pledging the listed companies’ shares that they hold. The
business facilitates customers in that it’s easy to obtain funds with low cost. The Group generates service fee and
interest income from such business.
As at the end of 31 December 2022, the Group has a balance of RMB0.2 billion of stock repo transaction and
a balance of RMB27.4 billion of stock pledge business, compared to RMB0.2 billion and RMB31.2 billion,
respectively, as at the end of 2021.
Investment Banking
Overview
The Group provides corporate finance services, including equity financing, debt financing and M&A financing
services. The Group strives to provide customers with “one stop” domestic and overseas investment banking
services and is committed to offering its clients customised corporate finance services and expanding
cross-selling opportunities across multiple business lines through its integrated investment banking platform.
The Group has gained a leading position in the PRC investment banking industry and aims to continue to improve
this position. As at 31 December 2022, the Group was one of the top PRC securities firms in terms of the amount
of equity securities lead-underwritten and debt securities lead-underwritten.
Equity financing
Equity financing is the core strength of the investment banking business of the Group in the PRC. The Group
sponsors and underwrites IPOs, follow-on offerings and rights issues on the A share market (including the STAR
Market) to assist its clients’ equity financing activities.
The number of sponsor representatives is the key to the scale of a securities firm’s equity underwriting business
in the PRC. In 2022, the Group completed 30 IPOs (including those on the BSE) with the total fundraising
amount of approximately RMB39.6 billion, ranking third in the market in terms of the number of transactions
and fourth in the market in terms of the amount of funds raised. The Group completed 17 IPOs on the STAR
Market raising RMB31.1 billion, ranking second in the market in terms of the number of transactions and the
amount of funds raised. In particular, the Group has achieved breakthroughs in the integrated circuit sector and
biomedical sector. In 2022, the Group completed eight IPOs and two re-financing projects in the integrated
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circuit sector with the funds raised amounting to RMB24.5 billion in 2022, and completed the listing of 10
enterprises with a market share of over 20%, ranking first in the market. In addition, its localised layout was
further increasingly optimised. The Group completed a total of 19 IPOs in the Yangtze River Delta with the funds
raised amounting to over RMB27.8 billion, ranking first in the market in terms of both the number of transactions
and fundraising amount.
In overseas equity capital market, Haitong International Securities maintained its leading position among
investment banks in Hong Kong. In 2022, Haitong International Securities completed 30 equity financing
transactions in the Hong Kong capital market, ranking third among all the investment banks in Hong Kong. It
sponsored the “dual-primary listing” of MINISO Co., Ltd. on the Hong Kong stock market. Haitong International
Securities continuously conducted business innovation, actively seized market opportunities and completed the
first SPAC project on the Hong Kong stock market and the first SPAC project on the US stock market.
Additionally, Haitong International Securities deepened the linkage of domestic and overseas businesses and
assisted in completing four GDR projects in Europe and two financial advisory projects for the financing of local
enterprises in India.
The Group divides its institutional clients into large corporate clients and SME clients based on the scale of their
business, and provides customised coverage and equity underwriting services based on prevailing market
conditions and customer needs. The Group has established sector-focused groups of designated relationship
managers to serve its large corporate clients. The Group covers its SME clients through local relationship
managers deployed in strategically important markets in the PRC. The Group has participated in a number of
landmark equity offerings involving large corporate clients in the PRC and has established long-term business
relationships with them.
The Group also focused on providing equity underwriting services to SMEs, especially non-state-owned
companies, which have contributed significantly to its fast-growing investment banking business.
Debt financing
The Group underwrites enterprise bonds, corporate bonds, financial bonds, medium-term notes, short-term
commercial papers and asset-backed securities to assist its clients’ debt financing activities. The debt
underwriting business of the Group primarily serves large corporate clients.
The Group believes that it has established a competitive advantage in the marketing and innovation capabilities
of its debt underwriting business. The Group has established a distribution network for fixed income products
that covers major investors such as large commercial banks, insurance companies, fund management companies
and rural credit cooperation associations. The Group assigns its sales and marketing personnel to cover specific
geographic regions and maintain nationwide sales coverage. The Group is a pioneer in product innovation and
is committed to assisting its clients to achieve lower financing costs. For example, in 2020, adhering to the
innovation-driven approach, the Group created the first credit risk mitigation warrant in the market with the
underlying of asset-backed notes under pandemic prevention and control, participated in the creation and
issuance of the first batch of standardised notes, and successfully issued the first public short-term corporate
bonds on the SZSE. In 2021, based on serving the national strategy and seizing the opportunity of innovation and
development, the Group successfully underwrote the first batch bonds issued by science and technology
innovation enterprise ( ), the first batch of carbon-neutral bonds in the SSE, the first offshore
bond in the Shanghai free trade zone, the first batch of and first special corporate bond for rural revitalization
( ) in China and SSE. In 2022, the Group successfully issued the first “green + rural
revitalization + ensuring energy supply” bond (“ + + ” ) in China.
In 2022, the Group underwrote 999 bonds with the total amount of bonds underwritten reaching RMB326.7
billion, of which the amount of corporate bonds was RMB23.1 billion, ranking second in the market. The Group
focused on serving the national strategy and issued a total of 39 green bonds raising a total amount of proceeds
of RMB84.3 billion. In China’s offshore bond issuance market, Haitong International Securities maintained its
leading position in the debt capital market in Hong Kong. For the year ended 31 December 2022, Haitong
International Securities ranked third among all the investment banks in Hong Kong in terms of issuance volume
in the China Risk G3 + CNY bond issuance market. It actively practised the ESG concept and underwrote a total
of 24 green bonds and sustainability bonds throughout the year, raising a total of USD8 billion. Haitong
International Securities was included in the FTSE4Good Index Series due to its outstanding ESG performance,
and ranked top five in terms of governance scorings in the global financial industry.
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Asset Management
Overview
Asset management mainly refers to the provision of comprehensive investment management services on
diversified products to individuals, corporations and institutional clients, including asset management, fund
management, public and private equity investment services.
The Group offers asset management products and services through Haitong Asset Management, HFT Investment
Management, Fullgoal Fund Management, private investment funds subsidiaries and the overseas asset
management business. As at the end of 31 December 2022, the total AUM of the Group amounted to RMB2.0
trillion.
Haitong Asset Management
Haitong Asset Management carries out businesses including targeted asset management, collective asset
management, specialised asset management, QDII business, and innovative business.
In order to meet investors’ demands with different risk profiles, Haitong Asset Management provides diversified
products, such as equity funds, bond funds, fund of funds, quant funds and money market funds. Targeted asset
management schemes are customised wealth management plans designed for individual customers. Through its
targeted asset management schemes, Haitong Asset Management provides customised investment plans to its
customers based on their characteristics and investment needs, as well as the most suitable financial products
available in the market, such as fixed income funds, balanced funds, selected fund of funds, selected equity funds
and stock index futures. Specialised asset management schemes are to serve clients’ specialised investment
purpose and are designed based on specific requirements and conditions of the base asset of a client, which
currently takes up a small percentage of the Group’s AUM.
Haitong Asset Management has formulated different marketing strategies and established various sales channels
for its products. The collective asset management products of Haitong Asset Management are promoted through
the branches of the Group nationwide or through agency banks. Haitong Asset Management cross-sells its
diversified asset management products and services to the brokerage customers of the Group through its
nationwide sales network. The customer relationship managers of the Group analyse customers’ needs in order
to identify suitable candidates for targeted asset management products. Institutional clients are also referred by
investment banking business and securities brokerage business.
As at 31 December 2022, the AUM of the management assets of Haitong Asset Management was RMB88.8
billion, representing a decrease of 20.0% from the beginning of the year of 2022. Among which, the AUM of
collective asset management reached RMB33.7 billion, representing a decrease of 15.5% as compared to the end
of December 2021; the AUM of targeted asset management reached RMB19.8 billion, representing a decrease
of 39.3% as compared to the end of December 2021; and the AUM of specialised asset management reached
RMB35.3 billion, representing a decrease of 8.3% as compared to the end of December 2021.
Fund management
The principal businesses of HFT Investment Management and Fullgoal Fund Management include management
of mutual funds (including QDII), asset management for corporate annuities, NSSF and specific customers,
providing professional fund investment financing services for investors.
HFT Investment Management, in which the Group owns a 51.0% equity interest as at 31 December 2022, is a
fully-licensed fund management company offering asset management products such as mutual funds, segregated
account management services and enterprise annuity plans. HFT Investment Management is also licensed to
provide asset management services to QDIIs. Its customer base ranges from retail individuals to high net worth
and institutional customers. In 2017, the registered capital of HFT Investment Management was increased to
RMB300 million by way of turning retained earning into registered capital, in which the Group still owns a 51%
equity interest.
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As at 31 December 2022, the AUM of HFT Investment Management amounted to RMB406.3 billion, of which
the AUM of mutual funds amounted to RMB141.0 billion and the AUM of bond funds amounted to RMB56.2
billion. The AUM of pension funds amounted to RMB223.9 billion, representing a year-on-year increase of
11.03%; the AUM of occupational annuities amounted to RMB76.7 billion, representing a year-on-year increase
of 27.64%. The size of HFT CSI short-term financing ETF became the biggest product in terms of market size
in the bond ETF market in China. The active equity funds realised good performance in the medium and long
term, with an overall performance ranking at the forefront in the market.
Fullgoal Fund Management is an affiliate fund management company in which the Group owns an equity interest
of 27.775% as at 31 December 2022, and is a fully-licensed fund management company offering asset
management products such as mutual funds, segregated account management services and enterprise annuity
plans. Fullgoal Fund Management is also licensed to provide asset management services to QDIIs. Fullgoal Fund
Management primarily distributes investment management products to retail and institutional customers
nationwide through banks, securities firms and its branches.
In 2022, Fullgoal Fund Management maintained a sound business development trend. As at 31 December 2022,
the AUM of Fullgoal Fund Management reached RMB1.37 trillion. The Group realised continuous breakthroughs
in its product innovation, and a number of products such as Fullgoal ChinaBond 7-10 Year Policy Bank Bond
ETF, Fullgoal CSI SEEE Carbon Neutral Index ETF and Fullgoal BSE 50 Component Index Fund realised the
industry’s “first batch of reporting, first batch of approval, and first batch of establishment”. The pension
business developed well, and the number and scale of annuity portfolios under management realised steady
growth. The separate account business developed rapidly, with the AUM exceeding RMB100 billion.
Private equity investment funds
The Group also operates a number of professional investment management platforms for private equity (PE),
which provides services including management of industrial investment funds, investment consultation and
promotion and establishment of investment funds.
The Group established Haitong-Fortis PE Fund Management in 2004 to manage the assets of the China-Belgium
Direct Equity Investment Fund, which principally invests in domestic high-tech SMEs that are at high-growth
stage with a clear path to IPO and adhering to its prudent investment strategy. Haitong-Fortis Private Equity Fund
Management was the first industry investment fund management company in the PRC, approved by the NDRC.
On 28 June 2022, Haitong Securities transferred 67% of the equity interest in Haitong-Fortis Private Equity Fund
Management to its wholly-owned subsidiary, Haitong Capital Investment.
In 2022, The PE investment fund business of the Group focused on the key strategic sectors, and researched the
leading market players in segments, along with the national strategies and development trends. The total AUM
of the Group’s PE investment funds amounted to RMB30 billion. The Group completed the formation of the
Haitong Lingang Refreshment Fund ( ), and was awarded upon bidding the engagement of
acting as the fund managers for several government invested funds including the master fund of industry guiding
fund of funds in the leading area of Pudong New Area ( ) and Anhui Conch
Industrial Internet Fund of Funds ( ) and other funds contributed by governments. In
2022, the investment operation of the PE investment funds of the Group invested in 42 new projects, nine
investment projects were listed and 11 projects have been approved by the CSRC and are awaiting IPO.
In 2022, Haitong Capital Investment was awarded the “2022 Top 100 Emerging Enterprises in Shanghai”, the
“2021-2022 Best Private Equity Investment Institutions”, the “2022 Influential Investment Institutions in China”
and other honours.
Overseas asset management
The Group’s overseas asset management is majorly conducted through Haitong International Securities. The asset
management team of Haitong International Securities coordinated with the investment banking, private wealth
management and other business teams in building a featured investment platform with the investment research
strength of purchasers and practice of the ESG investment concept, and organising an investment research team
with market experience and forward-looking horizon to continuously optimise the asset management business
structure, improve the asset quality, enhance the core competitiveness and conscientiously conduct investment
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management. In 2022, Haitong International Securities won many awards in the industry, including Insights &
Mandate – Professional Investment Awards ( – ), Lipper Fund Awards (
) and The Asset Triple A Country Awards for Sustainable Finance ( –3A
) – Best Innovation ETF in Europe ( ETF).
Trading and Institutional Client Services
Overview
The Group engages in the provision of stock sale and trading, prime brokerage, stock borrowing and lending and
stock research in major global financial markets for global institutional investors, as well as the issuance and
market making services for various financial instruments such as fixed income products, currency and
commodity products, futures and options, exchange traded funds and derivatives. Meanwhile, the Group exerts
and enhances the advantage of cooperation among business segments through investment funds and private
equity projects. The Group focuses on exploring investment opportunities with reasonable return on investment
capital, so as to expand customer relationships and promote overall growth of its business.
For years ended 31 December 2020, 2021 and 2022, segment revenue from its trading and institutional client
services business amounted to RMB14,449 million, RMB15,667 million and RMB4,465 million, respectively,
representing 26.6%, 27.1% and 10.6% of its total revenue, gains and other income, respectively.
The Group established Haitong Innovation Securities Investment on 24 April 2012, the registered capital of
which is RMB11.5 billion as at 31 December 2022, as its designated platform for alternative financial product
investments. The Group has established a team of professional staff with rich experience and has established a
risk control management system through which the Group can designate directors, impose investment limitations,
formulate risk control indicators, establish reporting structure and perform regular inspections and reviews on
Haitong Innovation Securities Investment.
The Group has strengthened its efforts in the innovation of trading and institutional clients services, optimised
the capital allocation, seized the market opportunities and diversified its profit-making models.
Trading
The Group conducts fixed income investment, derivatives trading, interest swap, equity investment, ETF
market-making, international gold trading and cross-border investment businesses in its trading segment. In
2022, the Group launched the “Toolkit ( )”, an on-balance-sheet product covering, among others, stock
index, commodity, interest rate and strategic index, to offer an effective driver to financial institutions,
enterprises and high-net-worth individual customers by providing high-quality services, and successfully
launched the “CSI Haitong Dynamic Allocation Index on Major Asset Categories” ( )
and linked products to meet investors’ demand for the allocation strategy on major asset categories. In addition,
the Group actively responded to national strategic goals on “carbon peaking and carbon neutrality” and issued
structural income certifications linked with the theme of carbon neutrality, vigorously promoting the ESG
investment concept. The Group is one of the first securities firms to obtain the market-making qualification for
six new exchange-traded options and was awarded China Financial Futures Exchange 2022 annual stock index
options “Excellent Market Maker Gold Prize” and “New Variety Listing Outstanding Contribution Award”. The
number of ETF market-making products of the Group increased to nearly 400, contributing shares and mutual
funds trading volume of RMB1.45 trillion. The Group served the cross-border financing demands of enterprises
and achieved interconnection with the cross-border derivative business of Haitong International Securities.
In 2022, the fixed-income business of the Group seized market opportunities, enhanced the building of its trading
capability and constantly improved its credit research and risk pricing capabilities, obtaining satisfactory
investment returns. It actively participated in investment and issuance of green bonds and green asset-backed
securities and practised the development concept of green finance. It successfully obtained the qualification for
the first commodity swap business primary trader on the Shanghai Futures Exchange. The Group achieved
breakthroughs for the OTC derivatives business and successfully launched OTC options linked with gold, bond
index revenue swaps and income certifications as well as cross-border bond revenue swaps. It served the national
strategy on the integrated development of the Yangtze River Delta and continuously boosted support to the
issuance of local government bonds.
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In 2022, Haitong Innovation Securities selected direct equity investment projects based on national scientific and
technological innovation strategies and focused on quality enterprises in the semiconductor, new energy, new
materials, high-end equipment manufacturing, bio-pharmaceutical and other industries with the vigorous support
of the state. It completed 14 new equity investment projects and 17 new STAR Market co-investment projects.
In 2022, Haitong International Securities continuously improved its global market trading capability and has
developed a comprehensive trading, research and sales platform for global institutional clients, which provides
comprehensive product solutions and enables overseas institutional investors to seize investment opportunities
in China. The cash stock business maintained stable development with an increasingly diversified customer
structure. The top 10 institutional clients covered international long-term investors, hedge funds and Chinese
funds, showing the influence and sales ability of Haitong International Securities’ various products among
institutional clients.
Institutional client services
The Group’s institutional clients mainly include listed companies in mainland China, Hong Kong, Macau,
Taiwan, the United States, Japan, India, and South Korea.
The Group strived to build a strong professional institutional sales service team and sped up improving
comprehensive service capability towards institutional clients through adjustments to organisational structures to
provide excellent services to mutual funds, banks, bank wealth management subsidiaries, insurance, social
security funds, private equity funds, QFII, WFOE and other domestic and overseas financial institutions,
including research sales, investment consulting, product designing, product sales, securities trading, marketing
planning and other comprehensive financial solutions, and provide “one-stop” services for domestic and overseas
leading institutions and “accompanying” services for growth stage customers.
In 2022, the Group continued to maintain its market-leading position in QFII/RQFII institutional customer
services. The Group continued to focus on cooperation with leading fund companies, optimise custody
outsourcing operational processes, conduct in-depth product research and development, and continued to make
efforts in asset management brand series product development, cooperate with mutual funds under the settlement
via trader model, ETF fund research, private fund screening and other aspects.
Research service
The research capability of the Group is one of its core competencies and plays a key role in the development of
its principal business lines. In recent years, the Group has increased its resource allocation to strengthen its
research capability. The number of employees on its research team was 455 as at 31 December 2020, 492 as at
31 December 2021 and 550 as at 31 December 2022, respectively. A number of its research analysts hold
professional qualifications, such as CFA, FRM and CIIA. The research team of the Group provides research
reports and regular company updates to external customers, including domestic fund management companies,
insurance companies, private equity funds and institutional investors, assisting them in identifying and
evaluating investment opportunities. In 2022, the research department of the Group issued a total of over 6,000
reports and organised nearly 19,000 roadshows, anti-roadshows and visits. Connecting domestic and overseas
research platforms and covering more than 1,650 stocks in Greater China, Japan, the United States, India, Korea
and other regions, the research team of Haitong Securities clients with professional, in-depth and timely research
and consulting services with an international vision. The Group won 17 awards in the team and analyst categories
in the 2022 “Asiamoney” annual poll, demonstrating that the Group has become a leading investment bank in
Asia in terms of research capabilities.
In addition to the research department of Haitong Securities, its subsidiary, Haitong Futures, has established a
dedicated research team focusing on technical analysis of futures products and providing recommendations to its
customers to maximise their returns while minimising investment risks. Furthermore, Hong Kong-based research
team under Haitong International Securities provides research coverage on Hong Kong-listed companies, which
serves to complement its research coverage on domestic listed companies.
Financial Leasing
Overview
Financial leasing became a business line of the Group following its acquisition of UT Capital Group. The Group
offers financial leasing, operating leasing, factoring, entrusted loans and relevant advisory services. through UT
Capital Group.
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Currently, UT Capital Group engages in a wide range of industries, including infrastructure, transportation &
logistics, industrials, education, health care, construction & real estate and the chemical industry. UT Capital
Group conducts its business through its wholly owned PRC incorporated subsidiary UniTrust. UT Capital Group
leverages rich industrial experience and market channels and works with renowned domestic and overseas
equipment manufacturers to provide comprehensive financing solutions and services for the business
development of customers. Over the past years, UT Capital Group has taken the initiatives to explore the business
model of securities firm-featured financial leasing and has launched a diversified product portfolio which
integrates equity investment with debt investment to provide more innovative structured financing solutions to
customers.
The financial leasing business of UT Capital Group primarily engages in direct leasing and sale-and-leaseback.
Direct Leases
A typical direct lease involves three parties, namely the lessor, the lessee, and the equipment supplier. The Group,
as the lessor, purchases the equipment from the equipment supplier and leases it to the lessee (customer) in return
for periodic lease payments. In a direct lease, the Group, as a lessor, has the title of leased equipment within the
lease term, while substantially all of the risks and rewards associated with the title of the leased equipment have
been transferred to the lessee. At the end of the lease term, the lessee has the option, upon prior notice to the
Group, to purchase the leased equipment, renew the lease, or return the leased equipment to the Group, if there
is no default on the part of the lessee or if the lessee’s default has been cured. If the lessee selects to purchase
the leased equipment, it should pay the Group the consideration prior to the expiry of the lease term. The Group
transfers the title of the leased equipment to the lessee after receiving the consideration.
Sale-and-leaseback
Sale-and-leaseback is a form of financial leasing where the lessor purchases the asset from the lessee who
originally owned such asset but subsequently sells it to the lessor to satisfy its financing needs, and the lessee
then leases the asset back from the lessor for a relatively long term, thereby permitting the lessee to continue to
be able to use the asset as a lessee (and not as an owner). At the end of the lease term, the lessee has the option
to repurchase the leased equipment thus regaining the title of the leased equipment.
The Group retains legal ownership of the asset during the lease term while the lessee controls the asset with the
benefits and risks of economic ownership. A typical sale-and-leaseback contract cannot be terminated without the
lessor’s consent during its term, with an option by the lessee to purchase the assets for a nominal value upon
expiry of the term.
For the year ended 31 December 2022, Haitong UT closely monitored macro-environmental changes, followed
the orientation of national industrial policies, and maintained a focus on operation and leasing and fully exerted
the advantages of “financing + assets-leasing”. Haitong UT further stepped up efforts in industrial development,
continuously expanded the regional layout on business, comprehensively improved the breadth and depth in the
application of financial technology and constantly stimulated endogenous drivers, achieving outstanding results
in revenue increase, stable scale and risk control. In 2022, Haitong UT achieved a profit of RMB1,533 million,
representing a year-on-year increase of 8.5%; and recorded a total revenue of RMB8,525 million, representing
a year-on-year increase of 4.2%. The average yield rate of interest-bearing assets was 6.81% and the weighted
average return on net assets was 9.16%. As at 31 December 2022, Haitong UT’s total assets reached RMB124,514
million, up by 8.5% from the end of 2021. Total equity reached RMB18,827 million, up by 6.9% from the end
of 2021. Haitong UT’s non-performing asset ratio amounted to 1.09% and the provision coverage ratio for
non-performing assets was 252.02%.
Treasury Management
The Group believes the management of its liquidity and capital resources is critical to its success. The planning
and finance department of the Group actively monitors its capital structure, source of financing and liquidity, and
is responsible for ensuring the liquidity and safety of its capital while improving yields on surplus cash.
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The Group has a comprehensive budgeting system that forecasts its cash inflow, cash outflow and cash balance
and estimates its liquidity needs for business expansion and other investments. The Group has also established
stringent treasury management measures based on its net capital, which require stress tests on overall liquidity
and other financial indicators before the Group makes any capital investments.
To manage its liquidity while improving yields on surplus cash, in addition to bank deposits and inter-bank
borrowings, the Group actively manages its liquid assets through money market and bond market operations by
investing in liquid financial instruments with low risk, such as fixed income securities and financial assets held
under resale agreements.
The Group seeks to diversify its source and type of financing to meet various liquidity needs in its operations.
Currently, the Group derives short-term financing for its PRC operations primarily from bond repurchase
transactions in the interbank market or through stock exchanges, inter-bank borrowings and issuing short-term
commercial papers.
Income from treasury management activities is included in the revenue and other income of headquarters and
others.
Business Network
As at 31 December 2022, the Group has 337 securities and futures branches (including 301 securities branches
and 36 futures branches) spanning across 30 provinces, municipalities and autonomous regions in China. As at
31 December 2022, the Group has established branches, subsidiaries or offices in 15 countries and regions in five
continents, including Asia, Europe, North America, South America and Oceania. With a nationwide branch
network and a strategic international presence, the Group has built a large and stable customer base. As at 31
December 2022, the Group had over 21 million domestic and overseas customers.
In expanding its branch network, the Group also considers the differences in securities market developments and
the regulatory requirements of different regions. The branches of the Group are strategically located in the
economically well-developed coastal regions in Eastern China and Southern China with high concentrations of
affluent individuals and SME clients, such as Shanghai, Zhejiang, Shandong, Jiangsu and Guangdong. The Group
also sets up branches in less penetrated regions with high growth potential but less price competition, such as
Heilongjiang, Gansu, Jiangxi and Anhui. As such, the Group has developed a strategically located branch
network, with coverage spanning from first-tier cities to third-tier cities. The Group accelerated its new network
layout.
The extensive network and market presence of the Group in strategic locations in the PRC has enabled it to
provide regionally focused customer service and coverage. In addition, through its branch network and together
with its substantial customer base, the Group believes it can maximise cross-selling opportunities across its
business segments. For example, products such as margin financing and securities lending, asset management and
stock index futures may be cross-sold to retail customers, while business opportunities with investment banking
and customised financial products may be developed among institutional customers.
The Group has been actively developing and expanding its branch network and it strives to achieve a balance
between branch network expansion and profitability at individual branches. Specifically, its criteria for opening
a brokerage branch in a particular location typically take into consideration the size of the local brokerage market
as compared to the overall PRC brokerage market, as well as its growth potential.
The Group has been actively adjusting and optimising its existing network coverage by establishing new
branches in fast-growing second-and third-tier cities and relocating branches from highly competitive and
concentrated regions to regions with relatively low penetration, moderate competition and high growth potential.
The Group will continue to establish new branches in order to expand its brokerage network coverage to increase
its revenue.
Development and maintenance of its futures business network has always been one of the Group’s business
focuses. The futures brokerage branches and securities brokerage branches of the Group are complementary to
each other. In regions where its securities brokerage business has less customer penetration, the Group intends
to devote more resources to develop its futures business platform in order to capture a larger market share. The
Group intends to allocate resources towards developing its futures business network to capture a dominant
market position.
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Sales and Marketing
The sales and marketing team of the Group not only has extensive sales and marketing experience in the financial
and securities industries, but also possesses a broad knowledge of financial products. In order to maintain its
competitive advantage, the Group requires its sales and marketing professional staff to complete rigorous training
and examinations. In addition, the Group has implemented a competitive incentive scheme to reward sales and
marketing personnel who demonstrate outstanding performance.
To support local sales and marketing teams, the branches of the Group have established service centres with
sufficient customer service staff members to handle customers’ enquiries, account-opening procedures and the
offering of after-sales services and technical support.
The licensed brokers system was amended in accordance with Provisional Measures on Management of
Securities Brokers ( ) promulgated by the CSRC in March 2009 pursuant to which
securities brokers are required to pass a qualifying exam, complete certain professional training and register their
qualification status with the SAC. To comply with these provisions, the Group does not allow its brokers to
engage in securities brokerage activities until they have passed the qualification exam, completed required
professional training and registered their qualification status with the SAC.
To maximise its sales and marketing efforts, the Group leverages cross-selling opportunities among its various
business operations, as well as between its PRC and overseas platforms. For example, the investment banking
business of the Group may refer high net worth customers and institutional clients to its securities and futures
brokerage business, while its securities and futures business may refer potential institutional clients to its direct
investment business. In addition, its brokerage business may also refer customers to its asset management
business.
To enhance brand awareness, the sales and marketing team of the Group conducts face-to-face meetings with
prospective customers, hosts public relations and investor education events and attends industry conferences. The
sales and marketing team of the Group also distributes its featured research reports and provides other
value-added financial advisory services to its customers in order to enhance customers’ loyalty.
Customer Services
The Group operates a customer service network that provides a full range of services through different channels,
including its nationwide branch network, customer service hotline and online platform. The customer services
of the Group principally include:
Branches: The Group offers customised services at its branches. Many of its branches in the PRC have
different service zones to provide specific types of services to its customers.
Customer service hotline: The customer service hotline is a comprehensive platform that combines trading,
information, consultation and marketing functions.
Online platform: The online platform allows its customers to execute real-time trades, record trading status
and records and check position and account information. The Group also offers stock quotes, financial news,
global market updates and financial commentaries, as well as research reports on stocks through its online
platform.
In addition, the Group actively provides customised and value-added services to institutional clients to satisfy
their demands through its nationwide branch network and comprehensive services, such as product
recommendations, advice on asset allocation and distribution of featured research reports.
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Internal Control and Risk Management
Governance structure
The Group believes effective risk management and internal controls are crucial to its success. The Group has
established an effective and comprehensive risk management and internal control system to identify, evaluate and
manage the risks it faces in its business operations. The Group has been attaching great importance to risk
prevention and control, and set up the operational philosophy of “pragmatic, pioneering, steady and excellent”
and the risk management philosophy of “prudence and even conservativeness”, and as a result of its sound
internal controls and risk management capabilities, the Group has successfully navigated through multiple
market and business cycles, regulatory reforms and industry transformations in over 30 years. of operations. By
establishing and improving the compliance management system and organizational system, the Group carried out
compliance consultation, training, review, compliance monitoring, inspections and accountability to penetrate the
compliance work into various business sectors, which has been recognized by the regulatory authorities.
The Group has established a five-level risk management and internal control governance structure, which
includes: (i) the board and compliance and risk control committee; (ii) chief risk control executive and general
compliance officer; (iii) compliance and risk control department; (iv) functional management departments; and
(v) relevant departments or positions in all business departments, all departments branches and subsidiaries. The
following chart sets forth a brief overview of the five-level governance structure of the Group:
board and compliance and risk control committee
chief risk control executive/general compliance officer
compliance and risk control department
functional management departments
relevant departments or positions in all business departments,
all departments branches and subsidiaries
The board and the compliance and risk control committee of the Group are the highest level of the risk
management and internal control structure of the Group.
Organised under the board of the Guarantor, the compliance and risk control committee is designed to assist its
board in overseeing its compliance with the laws and regulations applicable to its business operations.
The chief risk control executive and the general compliance officer appointed by the board of the Group are
independent from its management and report directly to its board and other PRC regulatory authorities. The chief
risk control executive and general compliance officer of the Group serve as the counsels to the compliance and
risk control committee and advise the board and the compliance and risk control committee on a regular basis.
The compliance and risk control department reports directly to the board of the Group and its general compliance
officer on a regular basis and plays a critical role in implementing its internal control policies through assisting
its general compliance officer.
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The functional management departments of the Group primarily include its brokerage operation centre, finance
and planning department and IT department. The functional departments cooperate with the compliance and risk
control department to manage risk exposure arising from the securities trading, capital deployment and asset
allocation, financial, accounting and IT systems, as well as to implement department-specific risk management
procedures.
The Group has risk management staff in its principal business lines to monitor and manage risks specific to its
business activities, and these staff work closely with its compliance and risk control department. The Group has
implemented a series of risk management and internal control procedures to manage risks that are specific to its
business activities.
Wealth Management Business
To ensure its wealth management businesses are conducted in compliance with the applicable laws and
regulations and to standardise the wealth management practice, the Group has established comprehensive internal
rules and guidelines for its wealth management business. The Group manages its branch network based on a
three-level governance structure: (i) head office; (ii) branch offices; and (iii) brokerage branches.
In response to the increasing risks associated with the margin financing and securities lending business, the
Group:
has established a monitoring system based on Net Capital requirements to strictly control the scale of its
margin financing and securities lending business and to prevent concentration of business in a single
customer or single kind of stock;
performs a credit check on each margin financing and securities lending customer, assign different credit
ratings to different customers based on standardised customer selection and rating systems and grant credit
to customers based on decisions made by its margin financing and securities lending credit granting
management committee;
determines different financing limits for different customers and set warning notices, margin call notices and
closing notices to ensure that the Group holds an adequate amount of collateral from each customer; and
uses a mark-to-market system to monitor customer transactions on a real-time basis and issue margin call
notices and closing notices or impose compulsory liquidation if its customers fail to cover shortfalls on
collaterals or repay the financing granted after the Group issues warning notices.
Investment Banking Business
The Group controls and manages the risk exposures associated with its investment banking business through the
internal review group, the quality control group and the compliance and risk control department, which are
generally involved in project approval, on-site due diligence, documents review, internal review meetings and
continuous supervision.
Asset Management Business
The compliance and risk control department of the Group monitors and evaluates its exposure to potential market
risks, operational risks, credit risks and regulatory risks arising from its asset management business. It cooperates
with its risk management staff working for its asset management business to monitor market risks, operational
risks, credit risks and regulatory risks in order to ensure effective implementation of its entrusted responsibilities,
the accuracy of its disclosure of risk-related information, prudence to develop its business and the protection of
its legal interests and the rights of its investors.
At the subsidiary level, the Group has appointed directors, supervisors and senior management to supervise and
monitor the risk management and internal control measures of its asset management subsidiaries. The Group
requires its asset management subsidiaries to establish their own risk management and internal control systems
based on applicable PRC regulations and its internal policies.
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The Group oversees and monitors these subsidiaries’ implementation of its internal policies and review the
effectiveness of their risk management and internal control systems on a regular basis. The Group also has a
reporting system which requires the compliance officer of each subsidiary to report its overall risk management
and internal controls to it at least twice a year and to notify the Group on a timely basis of any material risk
management issues.
Trading and Institutional Client Services Business
The Group has established a comprehensive risk management governance structure to manage the risks
associated with its trading and institutional client services business, which includes: the board of directors, the
investment decision committee, the compliance and risk control department and the trading and institutional
client services department.
In addition, the internal audit department and the compliance and risk control department of the Group schedule
quarterly on-site reviews and special audits of its overall trading and institutional client services business with
respect to its internal controls, ordinary business operations, financial and accounting management and the
operational performance of its trading and institutional client services business.
Financial Leasing Business
UT Capital Group adopts a prudent risk management philosophy in conducting financial leasing businesses. It
maintains a comprehensive risk management system and implements various risk management measures
throughout its business operations. UT Capital Group continually improves its comprehensive risk management
system to enhance its overall risk management capability and core competitiveness. The goal of its risk
management efforts is to maintain risks at a tolerable level and to maximise its risk-adjusted return.
The risk management of UT Capital Group is incorporated into the comprehensive risk management framework
of the Group. UT Capital Group reports key risk indicators to the Group and is supervised by the Group in terms
of the reporting of such risk indicators. Financial leasing business maintained satisfactory asset quality during
the recent years.
Anti-money Laundering
The Group is fully committed to establishing and enforcing appropriate policies and procedures to prevent money
laundering and terrorist financing and is compliant with all relevant legal and regulatory requirements. Money
laundering covers a wide range of activities intended to mask or alter the source of illegally obtained money. The
staff of the Group is required to comply with PRC laws and regulations. When new customers apply to open
trading accounts, its staff must manually check their identities and backgrounds. Staff members who know,
suspect or have reasonable grounds to believe that a customer might have engaged in money laundering activities
must immediately report the details to the general compliance officer and the compliance and risk control
department of the Guarantor.
In addition, the Group has established a risk-based approach in its customer acceptance policy which aims to
identify those types of customers that are likely to pose a higher than average risk of money laundering and
terrorist financing. This approach is based on a customer due diligence process that takes into account factors
such as the customer’s background, the nature of its business, its origin or residence, associated persons or
entities, its structure of ownership and any other information that may suggest that the customer presents any risk
in respect of money laundering and terrorist financing. Besides, the Group has established a sound anti-money
laundering organisational framework under the Board, forming an anti-money laundering management system
coordinated by the anti-money laundering leading group of the Group, led by the compliance department for
organization and implementation, and implemented by relevant business departments and branches. The Group
has developed an anti-money laundering management system consisting of the money laundering risk
management system of the Group, basic anti-money laundering system of the Group and other supporting
systems and operating procedures.
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For the year ended 31 December 2022, the Group incorporated the “special governance on anti-money
laundering” into its overall planning for the “Year of Compliance and Internal Control Culture Construction”,
organised internal inspections in respect of anti-money laundering work, carried out an internal assessment on
money laundering risk, comprehensively advanced the publicity of the money laundering and terrorism financing
risk management culture, strengthened the establishment of the money laundering risk management culture and
carried out a series of training courses on money laundering risk management to continuously improve the money
laundering and terrorism financing risk management of the Group. Meanwhile, the Group actively fulfilled
anti-money laundering promotion obligations and distributed promotional materials on anti-money laundering
through the WeChat official account of the Group to improve the awareness of investors on the prevention of
money laundering and terrorist financing risks.
The Group has never engaged in or knowingly assisted any money laundering activities.
Risk management
The Group has historically been focused on risk prevention and control in line with its prudent and conservative
investment policies and was among the first PRC securities firms to establish comprehensive internal control and
risk management systems. The Group has developed dedicated systems for its securities brokerage, investment
banking, asset management and proprietary trading businesses. The Group has also built sophisticated risk
monitoring systems for new-businesses development.
In accordance with the five-level internal control and risk management structure set forth above, the compliance
and risk control committee, the chief risk control executive and general compliance officer and its compliance
and risk control department of the Group work together in managing and monitoring these exposures to ensure
appropriate measures are implemented in a timely and efficient manner.
Legal and Regulatory
Licensing requirements
The Group conducts its securities business mainly in the PRC and Hong Kong and is therefore, subject to the
restrictions and regulatory requirements of the PRC and Hong Kong.
For the years ended 31 December 2020, 2021 and 2022, the Group had complied with the relevant regulatory
requirements and guidelines in material respects and obtained the permits and licences necessary for its
operations in accordance with the laws and regulations of the PRC and Hong Kong.
Legal proceedings
As at 31 December 2022, none of the legal proceedings to which the Group was a party, individually or in the
aggregate, would have a material effect on its business, financial condition or results of operations.
Information Technology
The IT system of the Group has been an integral part of its operations since its inception. The IT system consists
of three key components: front office, middle office and back office systems that generally cover transaction
management, customer service and internal management. The IT system of the Group serves not only as an
integral part of its operations, but also its business development platform. The IT system utilises products
provided by IBM, HP, CISCO and other leading IT system providers. The Group believes its well-developed IT
system will improve its operational efficiency and transaction management, customer service and quality of
internal management.
The IT system of the Group has three key features that distinguish it from its competitors. On transaction
management, its system is among the best in terms of processing capacity. The IT system can process the
transactions on a real-time basis in a timely and cost-efficient manner, which facilitates new businesses
development and promotion. In addition, the IT system assists management to gain a better understanding of its
products’ profitability. On customer service, the Group is committed to meeting its customer needs through
diversified channels, including but not limited to online transactions, mobile transactions and SMS platforms. In
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addition, the internal risk management modules of its system can identify risks promptly and obtain detailed
risk-related data in order to respond to the risks imposed in a timely and succinct fashion. Meanwhile, its IT
system allows the Group to standardise its internal procedures. As such, it facilitates its record-keeping, improves
its reliability and enhances its communication and operational efficiency. The system also allows the Group to
have a better understanding of its financial position. The Group adopts multiple layers of security measures,
including firewalls and digitalised verification and intrusion prevention systems, in order to achieve its network
security. For the years ended 2020, 2021 and 2022, the parent company’s total investment in information
technology was RMB875 million, RMB1,176 million and RMB1,479 million, respectively, which was mainly
used in construction of Zhangjiang Science and Technology Park, the second phase development of the new core
trading system and unified institutional customers services platform; it has continued to strengthen the digital
base, empowered the business and management and fully promoted the construction of “Digital Haitong 2.0” (
2.0); and it was also used in the second phase development of the new-generation core trading system,
building a multi-layer customer service system, enhancing the brand building of institutional business and
improving and empowering the operation and development of the Group.
Competition
The PRC securities industry is highly competitive. The Group believes that competition in the PRC securities
industry is based on several principal factors, including:
the range of products and services offered;
pricing;
customer service;
network coverage;
marketing and distributing capacities;
perceived financial strength; and
brand recognition.
For its wealth management business, the Group competes primarily with other PRC securities firms, in terms of
pricing and the range of products and services offered. As at the end of 2022, there are 140 registered securities
firms in the PRC according to CSRC. Intense price competition in recent years has lowered commission rates for
its securities brokerage business.
For its investment banking business, the Group competes primarily with other PRC and Sino-foreign joint
venture securities firms as well as PRC commercial banks in terms of brand recognition, marketing and
distribution capacity, service quality, execution capacity, financial strength and pricing.
For its asset management business, the Group competes primarily with fund management companies, banks,
insurance companies and other financial institutions in the PRC in terms of the range of products and services
offered, pricing and quality of customer service.
For its trading and institutional client services business, the Group competes primarily with other PRC securities
firms.
For its financial leasing business, the Group competes primarily with other market players in the PRC financial
leasing industry, especially those with strong shareholder backgrounds and capital strength.
Employees
The Group has not experienced any strikes or other material labour disturbances that have interfered with its
operations as at the date of this Offering Circular and the Group believes that its management, the labour union
and employees have maintained good relationships with each other.
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DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT BOARD OF DIRECTORS
DIRECTORS
The following table sets forth information regarding the directors of the Guarantor as at the date of this Offering
Circular:
Name Position
Mr. ZHOU Jie ( ) Executive Director, Chairman of the Board
Mr. LI Jun ( ) Executive Director, General Manager
Mr. TU Xuanxuan ( ) Non-executive Director
Mr. ZHOU Donghui ( ) Non-executive Director
Ms. YU Liping ( ) Non-executive Director
Mr. XU Jianguo ( ) Non-executive Director
Mr. ZHANG Ming ( ) Independent Non-executive Director
Mr. LAM Lee G. ( ) Independent Non-executive Director
Mr. ZHU Hongchao ( ) Independent Non-executive Director
Mr. ZHOU Yu ( ) Independent Non-executive Director
EXECUTIVE DIRECTORS
Mr. ZHOU Jie ( ), born in 1967, is a holder of master’s degree in engineering. Mr. Zhou has served as an
executive Director since 23 September 2016, the Chairman of the Board since 28 October 2016, and the secretary
of the CPC Committee of the Guarantor since July 2016. Mr. Zhou has concurrently served as the chairman of
the Assets and Liabilities Allocation Committee of the Guarantor. From February 1992 to June 1996, Mr. Zhou
worked at the Investment Banking Department of Shanghai International Securities Co., Ltd. (
). From June 1996 to December 2001, Mr. Zhou served successively as the manager of the Investment
Department, a deputy general manager, and the chairman of the board of directors and the general manager of
Shanghai SIIC Asset Operation Co., Ltd. ( ). From December 2001 to April 2003, he
was the director and general manager of SIIC Medical Science and Technology (Group) Limited (
( ) ). From January 2002 to July 2016, he acted successively as an executive director and vice
chief executive officer, an executive director and the executive vice president, and the vice chairman of the board
of directors and the chief executive officer of Shanghai Industrial Holdings Limited ( ,
listed on the Hong Kong Stock Exchange under the stock code of 0363). From August 2004 to July 2016, he
served successively as the chief planning officer, an executive director and a vice president, an executive director
and the executive vice president, and the president and a deputy secretary of CPC Committee of SIIC Shanghai
(Holding) Co., Ltd. ( ( ) ). From March 2010 to May 2012, he was the chairman of the
supervisory committee of Shanghai Pharmaceuticals Holding Co., Ltd. ( , listed on
the SSE under the stock code of 601607; listed on the Hong Kong Stock Exchange under the stock code of
02607), where he served as the chairman of the board of directors and the secretary of the CPC Committee from
June 2012 to June 2013 and from May 2016 to July 2016. Mr. Zhou has been a supervisor and the chairman of
the remuneration committee of the Shanghai Stock Exchange since 2016. He has been a deputy to the Shanghai
Municipal People’s Congress, a vice chairman of Shanghai Financial Association ( ), and an
arbitrator of Shanghai Arbitration Commission ( ) since 2017, and a director and a vice chairman
of the Securities Association of China ( ) since 2021.
Mr. LI Jun ( ), born in 1969, is a holder of master’s degrees in business administration and public
administration and management. Mr. Li has served as a deputy secretary of CPC Committee of the Guarantor
since August 2021, an executive Director since 28 September 2021, and the general manager of the Guarantor
since 28 October 2021. Mr. Li worked at the Shanghai Branch of China Pacific Insurance Co., Ltd. (
) from July 1992 to February 2001, successively serving as a staff member, a deputy section chief and
the section chief of the import division of the overseas business department, the section chief of the export
division of the transportation insurance department, and the section chief of business division I of the import and
export department. He worked at China Pacific Property Insurance Co., Ltd. ( )
from March 2001 to January 2003, and successively served as the section chief of the office secretary division,
a deputy manager of the Pudong sub-branch (responsible for daily operation), a deputy secretary and the
secretary of the CPC Party branch. From January 2003 to May 2014, he worked at Shanghai Financial Services
148
Office ( ), and successively served as an officer and a principal staff member of the
institution division, a deputy director of the institution division II, the director of the financial institution division
II, and the director of the local financial management division. From December 2013 to May 2014, he served as
a deputy secretary-general of the Management Committee of China (Shanghai) Free Trade Zone ( ( )
) (temporary position). From May 2014 to September 2014, he served as a deputy
secretary-general of the Management Committee of China (Shanghai) Free Trade Zone. From September 2014
to November 2018, he served as a deputy director of the Shanghai Financial Services Office. From November
2018 to August 2021, he served as a deputy director of the Shanghai Municipal Financial Regulatory Bureau (
) and a deputy director of the Shanghai Financial Affairs Bureau ( ).
Mr. Li has served as the member representative of council, the chairman of the Members’ Self-Discipline and
Management Committee ( ) and a member representative of ChiNext Market Stock
Issuance Standardization Committee ( ) of Shenzhen Stock Exchange since November
2021. Mr. Li served as the chairman of the supervisory committee of the Listed Companies Association of
Shanghai ( ) and the chairman of international cooperation committee of the Securities
Association of China ( ) since January 2022. Mr. Li has served as the chairman
of the board of directors and a non-executive director of Haitong International Securities Group Limited (
, listed on the Hong Kong Stock Exchange under the stock code of 0665), and the
chairman of the board of directors of Haitong International Holdings Limited ( ) since
October 2021.
NON-EXECUTIVE DIRECTORS
Mr. TU Xuanxuan ( ), born in 1973, is a holder of bachelor’s degree in economics and an economist. Mr.
Tu has been a non-executive Director of the Guarantor since 18 June 2019. Mr. Tu has served as the general
manager of the capital operation department of Shanghai Guosheng (Group) Co., Ltd. ( ( ) )
since March 2020. Mr. Tu worked at Bank of China, Shanghai Branch from July 1993 to March 2001 and at
Shanghai Office of China Orient Asset Management Corporation ( ) from March 2001 to
October 2004. He was in charge of the work of the asset management department of Shanghai Dasheng Assets
Co., Ltd. ( ) from October 2004 to September 2009, and was a deputy director of the Asset
Management center of Shanghai Guosheng (Group) Co., Ltd. from September 2009 to October 2012. Mr. Tu
served successively as an assistant to the president, a member of CPC Committee and a vice president of
Shanghai Guosheng Group Assets Co., Ltd. ( ) from June 2012 to January 2019
(during which he served as the deputy director (temporary position) of the intellectual property department of
State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government (
) from July 2014 to July 2015), a deputy general manager (responsible for daily operation) of the capital
operation department of Shanghai Guosheng (Group) Co., Ltd. from January 2019 to March 2020. Mr. Tu has
been a director of Arcplus Group PLC ( , listed on the Shanghai Stock Exchange
under the stock code of 600629) since September 2020, a director of Lingang Group ( ( )
) since March 2021, a director of Shanghai Di’an Investment Management Co., Ltd. (
) since July 2021, a director of Shanghai Weian Investment Management Co., Ltd. (
) since July 2021, the general manager, an executive director and the legal representative of Shanghai
Sheng Rui Investment Co., Ltd. ( ) since December 2021, a director of Shanghai Tunnel
Engineering Co., Ltd. ( , listed on the Shanghai Stock Exchange under the stock code
of 600820) since January 2022, and a director of Anxin Trust Co., Ltd. ( , listed on the
Shanghai Stock Exchange under the stock code of 600816) since September 2022.
Mr. ZHOU Donghui ( ), born in 1969, is a holder of a bachelor’s degree in accountancy and a senior
accountant. Mr. Zhou has been a non-executive Director since 18 June 2020. Mr. Zhou served as the general
manager of Shanghai Haiyan Investment Management Company Limited ( ) from July
2015 to November 2022. Mr. Zhou served as a staff member of the finance section and a deputy section chief
of the fund and price section of the finance and price department of Shanghai Tobacco (Group) Company (
( ) ) from July 1991 to September 2000. Mr. Zhou was also a deputy manager and the manager of
the finance department of China Tobacco Shanghai Import & Export Co., Ltd. (
) from September 2000 to September 2008 and a deputy director of the Investment Management Department
of Shanghai Tobacco (Group) Company from September 2008 to April 2011. Mr. Zhou served as a deputy director
of the finance department of Shanghai Tobacco Group Co., Ltd. ( ) from April 2011
to February 2015, and an executive deputy director of the Investment Department of Shanghai Tobacco Group
Co., Ltd. and an executive deputy general manager of Shanghai Haiyan Investment Management Company
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Limited from February 2015 to July 2015. Mr. Zhou has been a non-executive director of Orient Securities
Company Limited ( , listed on the Shanghai Stock Exchange under the stock code of
600958; listed on the Hong Kong Stock Exchange under the stock code of 03958) since May 2020, and a
non-executive director of China Pacific Insurance (Group) Co., Ltd. ( ( ) , listed
on the Shanghai Stock Exchange under the stock code of 601601; listed on the Hong Kong Stock Exchange under
the stock code of 02601) since January 2021.
Ms. YU Liping ( ), born in 1962, is a holder of master’s degree in business administration and a senior
accountant. Ms. Yu has served as a non-executive Director since 8 June 2015. Ms. Yu served as a vice president
of Bright Food (Group) Co., Ltd. ( ( ) ) from August 2010 to June 2022. Ms. Yu served in
several positions in Shanghai Light Industry Bureau ( ) and Shanghai Light Industry Company
(Group) ( ( ) ) from August 1996 to April 2006, including deputy director of the finance
department, manager of the finance department and vice general accountant. She was a member of CPC
Committee, a vice president and the chief financial officer of Shanghai Yimin Food Plant No.1 (Group) Co., Ltd.
( ( ) ) from August 2006 to August 2008. Ms. Yu served as the chief financial
officer of Shanghai Guangdian (Group) Co., Ltd. ( ( ) ) from August 2008 to August 2010.
Ms. Yu served as the chairman of the supervisory committee of Shanghai Yimin Food Group (
) from March 2015 to May 2017, and the chairman of the supervisory committee of NGS Supermarket (Group)
Co., Ltd. ( ( ) ) from September 2013 to September 2018. Ms. Yu was the legal
representative of Shanghai Light Industry Company (Group) ( ( ) ) from March 2014 to
February 2019. Ms. Yu was the chairman of the supervisory committee of Bright Food Group Finance Co., Ltd.
( ) from September 2014 to July 2019. Ms. Yu served as a director of Shanghai
Hongqiao International Commodity Import, Sales and Exhibition Co., Ltd. (
) from November 2018 to June 2022.
Mr. XU Jianguo ( ), born in 1964, is a holder of Master of Professional Accountancy degree and a senior
accountant. Mr. Xu has been a non-executive Director of the Guarantor since 18 October 2016. He has served
as a director, a vice president, and the chief financial officer of Shanghai Electric Holding Group Co., Ltd. (
, formerly known as Shanghai Electric (Group) Corporation ( ( ) ))
since January 2022. Mr. Xu worked at the finance department and the audit office of Shanghai Cable Works(
) from July 1984 to December 2001, the inspection office of Shanghai Electric (Group) Corporation
from January 2002 to March 2004, and the assets and finance department of Shanghai Electric Assets
Management Company Limited ( ) from April 2004 to September 2005, respectively.
He served as an assistant to the financial manager of the management department I of Shanghai Electric Assets
Management Company Limited from September 2005 to August 2008, during which he also served as the chief
financial officer of Shanghai Li Da Heavy Industrial Manufacturing Limited ( ) from
March 2006 to August 2008. From August 2008 to December 2009, Mr. Xu was a deputy director of the assets
and finance department of Shanghai Electric Assets Management Company Limited. He served as a deputy
director of the financial budget department of Shanghai Electric (Group) Corporation from December 2009 to
April 2013, and the director of the financial budget department of Shanghai Electric (Group) Corporation from
April 2013 to January 2022. Mr. Xu served as the chairman of the supervisory committee of Shanghai Highly
(Group) Co., Ltd. ( ( ) , listed on the Shanghai Stock Exchange under the stock code
of 600619) from December 2017 to February 2023, the chairman of the board of directors of Shanghai Haiya
Industrial Co., Ltd. ( ) from March 2019 to June 2022, the chairman of the board of
directors of Shanghai Kaihai Industrial Co., Ltd. ( ) from June 2019 to June 2022, a
director of Tianjin Pipe Corporation from March 2020 to February 2023, and a director of Shanghai Electric
Henglian Industry Development Co., Ltd. ( ) from June 2020 to February
2023. Mr. Xu has been a director of Shanghai Electric Group Finance Co., Ltd. (
) since April 2013, and a director of Shanghai Life Insurance Company Ltd. ( )
since March 2015. Mr. Xu has also served as a director of Shanghai Micro Electronics Equipment Co., Ltd. (
) since June 2016, the chairman of the board of directors of Shanghai Electric Group
Hong Kong Limited since September 2021, and the chairman of the board of directors of Shanghai Electric Hong
Kong Co., Ltd. ( ) since June 2022.
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INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. ZHANG Ming ( ), born in 1958, is a holder of doctor’s degree in economics, a professor, a doctoral
supervisor, and a senior researcher. Mr. Zhang has served as an independent non-executive Director since 12 June
2016. He currently lectures at the School of Accountancy of Shanghai University of Finance and Economics (
). Mr. Zhang has lectured in Shanghai University of Finance and Economics since
graduation from this university in 1983 and has been the director of the teaching office, a deputy department
director and then the deputy director of the school of accountancy. He is now a professor and a doctoral
supervisor in the same university. Mr. Zhang has been an independent director of Wuxi Zhenhua Automobile
Parts Co., Ltd. ( , listed on the Shanghai Stock Exchange under the stock code
of 605319) since May 2018, an independent director of National Silicon Industry Group Co., Ltd. (
, listed on the Shanghai Stock Exchange under the stock code of 688126) since March 2019,
a director of Shanghai Shensi Enterprise Development Co., Ltd. ( ) since November
2019, and an independent director of Shanghai Zhangjiang Hi-Tech Park Development Co., Ltd. (
, listed on the Shanghai Stock Exchange under the stock code of 600895) since June
2021. Mr. Zhang served as an independent director of Shanghai Pudong Development Bank Co., Ltd. (
, listed on the Shanghai Stock Exchange under the stock code of 600000) from May 2016
to April 2022.
Mr. LAM Lee G. ( ), born in 1959, is a holder of doctor’s degree in philosophy, a solicitor of the High
Court of Hong Kong (and formerly a member of the Hong Kong Bar), an accredited mediator of the center for
Effective Dispute Resolution (CEDR), a fellow of Certified Management Accountants (CMA) Australia, the
Hong Kong Institute of Arbitrators, the Hong Kong Institute of Directors and the Institute of Corporate Directors
Malaysia (ICDM), and an honorary fellow of Certified Public Accountants (CPA) Australia, the Hong Kong
Institute of Facility Management, and the University of Hong Kong School of Professional and Continuing
Education. Mr. Lam has served as an independent non-executive Director of the Guarantor since 6 April 2017.
Mr. Lam is experienced in general management, strategy consulting, corporate governance, direct investment,
investment banking and asset management. Mr. Lam earlier served as the general manager of Hongkong Telecom,
vice president and managing partner – Greater China of A.T. Kearney (an international management consulting
firm), a member of the senior management of ChiaTai Enterprises International Limited (now known as C.P.
Lotus Corporation) and also held positions including chairman, director and CEO at various subsidiaries of this
group, the managing director of BOC International Holdings (the international investment banking arm of Bank
of China Group) and a vice chairman and the COO of the investment banking division of BOC International
Holdings, an executive director of Singapore Technologies Telemedia (a member of Temasek Holdings), the
chairman – Hong Kong, Vietnam, Cambodia, Laos, Myanmar and Thailand and a senior advisor – Asia of
Macquarie Capital, the non-executive chairman – Greater China and ASEAN and the chief advisor – Asia of
Macquarie Infrastructure and Real Assets, and a senior advisor – Asia of Macquarie Group.
Mr. Lam is currently an independent non-executive director of each of CSI Properties Limited (stock code: 497),
Vongroup Limited (stock code: 318), Mei Ah Entertainment Group Ltd. (stock code: 391), Elife Holdings Limited
(stock code: 223), Hang Pin Living Technology Company Limited (stock code:1682), Huarong International
Financial Holdings Limited (stock code: 993), Kidsland International Holdings Limited (stock code: 2122), and
Greenland Hong Kong Holdings Limited (Stock code: 337), and a non-executive director of each of Sunwah
Kingsway Capital Holdings Limited (stock code: 188), China LNG Group Limited (stock code: 931) and Mingfa
Group (International) Company Limited (stock code: 846) and was redesignated as an executive director from
non-executive director of Hong Kong Aerospace Technology Group Limited (stock code: 1725) since 3 January
2022, the shares of all of which are listed on the Hong Kong Stock Exchange. Mr. Lam is also an independent
non-executive director of Asia-Pacific Strategic Investments Limited (Stock code: 5RA), Alset International
Limited (stock code: 40V), Beverly JCG Limited (stock code: VFP), and Thomson Medical Group Limited (stock
code: A50), the shares of all of which are listed on the Singapore Exchange. Mr. Lam is an independent
non-executive director of AustChina Holdings Limited (stock code: AUH), whose shares are listed on the
Australian Securities Exchange and TMC Life Sciences Berhad (stock code: 0101), whose shares are listed on
the Bursa Malaysia, and a non-executive director of Jade Road Investments Limited (stock code: JADE), whose
shares are listed on the London Stock Exchange.
Mr. Lam served as a non-executive director of National Arts Group Holdings Limited (a company listed on the
Hong Kong Stock Exchange under the stock code of 8228) from June 2017 to July 2022. Mr. Lam has been
serving as an independent non-executive director of RENHENG Enterprise Holdings Limited (stock code: 3628)
since 30 June 2022.
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Mr. ZHU Hongchao ( ), born in 1959, is a holder of master’s degree in law and a senior lawyer. Mr. Zhu
has been an independent non-executive Director since 18 June 2019. Mr. Zhu served as the director and a senior
partner of Shanghai United Law Firm ( ) from June 1986 to March 2020 and since 1998,
respectively. Mr. Zhu currently serves as an arbitrator of each of Shanghai International Economic and Trade
Arbitration Commission (Shanghai International Arbitration center) and Shanghai Arbitration Commission, and
a part-time professor of East China University of Political Science and Law. Mr. Zhu has been selected as one
of Shanghai Leading Talents ( ). Mr. Zhu served as a lawyer at Shanghai First Law Firm (
) from July 1983 to June 1986, and the vice president of All China Lawyers Association and
the president of the sixth session of Shanghai Bar Association from 1994 to 2018. Mr. Zhu has served as an
independent director of Caitong Fund Management Co., Ltd. ( ) since June 2011, an
independent director of Jupai Holdings Limited ( , listed on NYSE under the stock code of
JPPYY) since June 2015, an independent director of Leju Holdings Limited ( , listed on NYSE
under the stock code of LEJU) since March 2017, an independent non-executive director of E-House (China)
Enterprise Holdings Limited ( ( ) , listed on the Hong Kong Stock Exchange under the
stock code of 2048) since July 2018, an independent director of Shanghai Hysea Industrial Communications Co.,
Ltd. ( ) since July 2020, an independent director of Shanghai Research Institute
of Building Sciences Group Co., Ltd. ( ) since November 2020, an independent
non-executive director of Sansheng Holdings (Group) Co., Ltd. ( ( ) , listed on the Hong
Kong Stock Exchange under the stock code of 2183) since February 2021, an independent director of Shanghai
Bailian Group Co., Ltd. ( , listed on the Shanghai Stock Exchange under the stock
code of 600827) since June 2021, and an independent director of Bright Real Estate Group Co., Ltd. (
, listed on the SSE under the stock code of 600708) since August 2021.
Mr. ZHOU Yu ( ), born in 1959, is a holder of doctor’s degree in economics, a researcher, and a doctoral
supervisor. He is an expert entitled to the special government allowances of the State Council and an executive
director of China Association of World Economic Research ( ). Mr. Zhou has been an
independent non-executive Director since 18 June 2019. He is currently a researcher of Shanghai Academy of
Social Sciences. Mr. Zhou served as a teacher of the Finance Department at Xinjiang University of Finance and
Economics ( ) from August 1982 to March 1992, during which he served as a visiting researcher at
Osaka University of Commerce ( ) from April 1990 to March 1992. He pursued a master’s degree
and a doctor’s degree at the Department of Economics of Osaka City University ( ) from April 1992
to March 2000. He served as a visiting researcher at the Graduate School of Economics of Osaka City University
from April 2000 to November 2000, served in various positions at the Institute of World Economy of Shanghai
Academy of Social Sciences including assistant researcher, associate researcher, and deputy director of the
Finance Research Institution from December 2000 to October 2008, during which he served as a post-doctoral
fellow of economic theory at Shanghai Academy of Social Sciences ( ) from January 2001 to
December 2002. He served as the director of the International Finance Research Institution of the Institute of
World Economy of Shanghai Academy of Social Sciences ( ) and
the director of the International Finance Monetary Research center of Shanghai Academy of Social Sciences (
) from October 2008 to December 2020.
SUPERVISORS
The following table sets forth information regarding the supervisors of the Guarantor as at the date of this
Offering Circular:
Name Position
Mr. TONG Jianping ( ) Chairman of the Supervisory Committee
Mr. ZHAO Yonggang ( ) Vice Chairman of the Supervisory Committee,
Employee Representative Supervisor
Mr. SHI Xu ( ) Employee Representative Supervisor
Mr. WU Xiangyang ( ) Employee Representative Supervisor
Mr. RUAN Feng ( ) Supervisor
Mr. LI Zhenghao ( ) Supervisor
Mr. CAO Yijian ( ) Supervisor
Mr. DONG Xiaochun ( ) Supervisor
Ms. DAI Li ( ) Supervisor
152
Mr. TONG Jianping ( ), born in 1962, is a holder of bachelor’s degree in law, and obtained his master’s
degree in political economy from the Central Party School of the Communist Party of China ( ). He
has served as the chairman of the Supervisory Committee of the Guarantor since 7 September 2022. Mr. Tong
worked in the People’s Procuratorate of Shanghai Municipality ( ) from July 1984 to June
2012, during which he served as a clerk and an assistant prosecutor when working in a branch of the People’s
Procuratorate of Shanghai Municipality from July 1984 to September 1988, and became a deputy-section-chief
level officer since October 1987; he served as an officer and deputy head of the district/county section when
working in the Tax Office of Shanghai People’s Procuratorate from September 1988 to July 1993, and became
a section-chief level officer since March 1992; he served as a an officer, a deputy head of the case handling team
II, the section chief of the case handling section I and a deputy-division-director level procurator when working
in the Division III of a branch of the People’s Procuratorate of Shanghai Municipality from July 1993 to May
1995; from May 1995 to December 2009, Mr. Tong worked in the Second Branch of the People’s Procuratorate
of Shanghai Municipality, and successively served as a deputy director of the Corruption and Bribery Office,
where he attended the 14th training course for section level officers in Party School of Politics and Law of
Shanghai from October 1995 to November 1995, and became a division-director officer since June 2000, a deputy
director of the political department, where he attended the 21st advanced course for senior specialists of Party
School of Shanghai Committee of the CPC from May 2001 to June 2001, and the director of the Anti-Corruption
and Bribery Bureau where he attended the 24th training course for young and middle-aged cadres of Party School
of Shanghai Committee of the CPC from September 2002 to January 2003, became a member of the procuratorial
committee since June 2003, served a temporary position in the politics and law committee of the Shanghai
Municipal Committee of the CPC from September 2003 to December 2003 and took on-job postgraduate program
of Party School of the Central Committee of the CPC from July 2004 to July 2007; and from December 2009
to June 2012, he worked in the First Branch of the People’s Procuratorate of Shanghai Municipality where he
served as the director of the political department (deputy bureau director level) from December 2009 to May
2012, and was a member of the Leading Party Members Group from February 2010 to June 2012. Mr. Tong
served a temporary position as a deputy secretary of the discipline inspection committee and head of the
supervision and audit department of the Bureau of Shanghai World Expo Coordination ( ) from August
2008 to June 2011, a standing member of the Shanghai Municipal Commission for Discipline Inspection of the
CPC ( ) from May 2012 to May 2017, a deputy secretary of the Shanghai Municipal
Commission for Discipline Inspection of the CPC from May 2017 to June 2022, and a vice chairman of the
Shanghai Municipal Supervisory Committee ( ) from January 2018 to July 2022. Mr. Tong
served as a member of the 10th and 11th Shanghai Municipal Committee for Discipline Inspection of the CPC.
From December 2021 to December 2022, Mr. Tong served as a deputy to the 15th Shanghai Municipal People’s
Congress. Since December 2022, Mr. Tong has served as a member of the 14th Shanghai Municipal Committee
of the Chinese People’s Political Consultative Conference.
Mr. ZHAO Yonggang ( ), born in 1972, is a holder of bachelor’s degree in economics and an economist.
He has served as a deputy secretary of the CPC Committee of the Guarantor since May 2021, an employee
representative Supervisor and the vice chairman of the Supervisory Committee of the Guarantor since 11 June
2021. Mr. Zhao worked in Shapingba Sub-branch of Chongqing Branch of China Pacific Insurance Company (
) from July 1995 to March 2000, where he served successively as a salesman, a deputy
manager of the business department and the manager of the business department. He worked in Chongqing
Branch of China Pacific Life Insurance Co., Ltd. ( ) from March 2000 to
September 2001, during which he successively served as the section chief of the human resources department,
the person-in-charge of the human resources department and the deputy manager of the human resources
department in charge of operation. He served as the deputy secretary of the Youth League Committee in charge
of operation and secretary of the Youth League Committee of China Pacific Life Insurance Co., Ltd. from
September 2001 to February 2006. Mr. Zhao served as a member of the CPC Committee and a deputy general
manager of Guizhou Branch of China Pacific Life Insurance Co., Ltd. from February 2006 to March 2008. Mr.
Zhao served as the deputy head of the department of the Party and masses affairs, deputy director of the office
of the CPC Committee, secretary of the Youth League Committee, general manager of the staff work department
and director of the party affair department of China Pacific Insurance (Group) Co., Ltd. ( ( )
) from March 2008 to July 2011. Mr. Zhao served as the director of the strategic transformation
office of China Pacific Life Insurance Co., Ltd. from July 2011 to December 2011. He served as the secretary
of the CPC Committee and the general manager of Heilongjiang Branch of China Pacific Life Insurance Co., Ltd.
from November 2011 to October 2014, the secretary of the CPC Committee of Henan Branch of China Pacific
Life Insurance Co., Ltd. from October 2014 to December 2016, the general manager of Henan Branch of China
Pacific Life Insurance Co., Ltd. from October 2014 to July 2016, a member of the CPC Committee of China
153
Pacific Life Insurance Co., Ltd. from May 2016 to January 2018, the chairman of the trade union of China Pacific
Life Insurance Co., Ltd. from August 2016 to September 2018, the head of the organization department of the
CPC Committee and the general manager of human resources department of China Pacific Life Insurance Co.,
Ltd. from December 2016 to January 2018, and the human resources director of China Pacific Life Insurance Co.,
Ltd. from March 2017 to February 2018. From August 2016 to March 2019, Mr. Zhao served as the chairman
of the trade union of China Pacific Insurance (Group) Co., Ltd. He served as the head of the organization
department of the CPC Committee of China Pacific Insurance (Group) Co., Ltd. from January 2018 to April 2020,
a member of the CPC Committee of China Pacific Insurance (Group) Co., Ltd. from January 2018 to May 2021,
and a vice president of China Pacific Insurance (Group) Co., Ltd. from October 2018 to May 2021.
Mr. SHI Xu ( ), born in 1972, is a holder of master’s degree in management and an accountant. Mr. Shi has
served as an employee representative Supervisor of the Guarantor since 18 June 2019. He has served as the
general manager of the audit department of the Guarantor since December 2019. Mr. Shi served in the following
various positions in the Guarantor since July 1999, including: project assistant, deputy manager of the off-site
audit department and manager of the off-site audit department when working in the audit department from July
1999 to November 2007; manager of the audit department IV of the risk control headquarter from November
2007 to June 2009; manager of the on-site audit department VI of the risk control headquarter from June 2009
to March 2011; manager of the on-site audit department IV of the audit department from March 2011 to March
2014; manager of the audit department IV of the audit department from March 2014 to November 2014; assistant
to general manager of the audit department from November 2014 to March 2018; and deputy general manager
of the audit department from March 2018 to December 2019. Mr. Shi served as a supervisor of Liaoning Haitong
New Energy Low-carbon Industry Equity Investment Fund Limited (
) from December 2016 to November 2019, and a supervisor of Fullgoal Fund Management Co., Ltd. (
) from November 2016 to October 2020. He has served as a supervisor of Haitong Auspicate
Capital Management Co., Ltd. ( ) since December 2016, and a director of Haitong
Capital Investment Limited ( ) since July 2019.
Mr. WU Xiangyang ( ), born in 1966, is a holder of master’s degree in law and an economist. Mr. Wu has
served as an employee representative Supervisor of the Guarantor since 18 June 2019. He has been the general
manager of the legal department of the Guarantor since January 2023. Mr. Wu served as a teacher at Huibu
Middle School in Fengxin County, Jiangxi Province ( ) from July 1985 to September 1987,
and an officer of the Publicity Department of the CPC Committee and the secretary of the general Communist
Youth League branch of the department of electronic engineering at Nanchang Aerospace College (
) from July 1991 to September 1995. He pursued his master’s degree in the economic law department of East
China University of Political Science and Law ( ) from September 1995 to July 1998 and obtained
a master’s degree in law when graduated. Mr. Wu served as the asset administrator of the legal affairs office of
Bank of Communications Shanghai Branch ( ) from August 1998 to April 2000. Mr. Wu has
served in the following various positions in the Guarantor since January 2001, including: project manager of the
investment banking headquarters from January 2001 to September 2002; legal counsel of the general manager
office from September 2002 to July 2007; deputy manager of the legal affairs department of the general manager
office from July 2007 to January 2008; deputy manager of the legal compliance department of the compliance
office from January 2008 to November 2008; manager of the legal compliance department of the compliance
department from November 2008 to March 2010; manager of the compliance inspection department of the
compliance department from March 2010 to March 2011; manager of the compliance inspection department of
the compliance and risk management headquarters from March 2011 to March 2014; manager of the compliance
review department of the compliance and risk management headquarters from March 2014 to August 2015; and
assistant to general manager of the compliance and risk management headquarters from August 2015 to May
2017. He worked in the compliance and legal department from May 2017 to January 2023, where he served as
an assistant to the general manager of the compliance and legal department of the Guarantor from March 2018
to March 2020, a deputy general manager of the compliance and legal department of the Guarantor from March
2020 to March 2022, and a deputy general manager (in charge of daily operation) of the compliance and legal
department of the Guarantor from March 2022 to January 2023. He has served as the chairman of the supervisory
committee of Haitong Futures Co., Ltd. ( ) since July 2019, a director of Shanghai Weitai
Properties Management Co., Ltd. ( ) since March 2020, and the chairman of the
supervisory committee of Haitong UniTrust International Leasing Co., Ltd. ( ) since
May 2022.
154
Mr. RUAN Feng ( ), born in 1968, is a holder of bachelor’s degree in accountancy and is recognized as a
senior auditor. Mr. Ruan has served as a Supervisor of the Guarantor since 20 October 2020. Mr. Ruan has been
a deputy general manager of the audit department (formerly the audit and supervision department) of Shanghai
Guosheng (Group) Co., Ltd. ( ( ) ) since May 2019. Mr. Ruan worked at Shanghai
Municipal Audit Bureau ( ) from August 1994 to May 2019 and successively served in various
positions including staff member of the audit division in the commercial grain trade commission; staff member,
deputy section chief and section chief of the audit division in the economic and trade commission; and senior
section member of the second administrative audit division. Mr. Ruan has been a supervisor of Shanghai Cultural
Industry Development Investment Fund Management Co., Ltd. ( ) since
February 2020, and a supervisor of Green Development Fund Private Equity Investment Management (Shanghai)
Co., Ltd. ( ( ) ) since June 2021.
Mr. LI Zhenghao ( ), born in 1975, is a holder of bachelor’s degree and EMBA degree and a senior
accountant. Mr. Li has served as a Supervisor of the Guarantor since 18 June 2020. He has been the general
manager of the finance department of Shenergy Group Company Limited ( ( ) ) since June 2019.
Mr. Li served as an accountant, a loan officer and a senior account manager of Shanghai Pudong Development
Bank Co., Ltd. ( , listed on the SSE under the stock code of 600000) from July
1997 to January 2003. Mr. Li served as the president of Siping Road Sub-branch of Shanghai Pudong
Development Bank from February 2003 to March 2007. Mr. Li worked at Shenergy Group Finance Co., Ltd. (
) from April 2007 to April 2017, successively serving as an assistant to the manager of the
finance department, a deputy manager and the manager of the accounting and settlement department, and the
manager and the director of operations of the planning and finance department. Mr. Li served as a deputy
manager of the finance department at Shenergy Group Company Limited ( ( ) ) from May 2017
to May 2019. Mr. Li served as the chairman of the supervisory committee of Shanghai Shenxin Environmental
Protection Co., Ltd. ( ) from June 2019 to November 2022. Mr. Li has been a director of
Shanghai Gas Company Limited ( ) since June 2019, and a director of Shenergy Company
Limited ( , listed on the SSE under the stock code of 600642) since July 2020.
Mr. CAO Yijian ( ), born in 1976, is a holder of master’s degree in science and an economist. Mr. Cao
has served as a Supervisor since 18 June 2019. He has served as the general manager of the investment
development department of Shanghai Jiushi (Group) Co., Ltd. ( ( ) ) since April 2018. Mr.
Cao served as a staff member of Shanghai Huipu Technology Investment Company Limited (
) from March 2001 to February 2003 and a staff member of Shanghai Qiangsheng Holding Co., Ltd. (
, listed on the SSE under the stock code of 600662) from February 2003 to July 2003.
He served as the manager of the asset management department of Shanghai Huipu Technology Investment
Company Limited from July 2003 to July 2007 and a staff member of the asset operation department at Shanghai
Qiangsheng Group Co., Ltd. ( ) from August 2007 to November 2008. He also worked as
an assistant to the manager of the asset operation department of Shanghai Qiangsheng Group Co., Ltd. from
November 2008 to June 2009 and a deputy manager of the asset operation department of Shanghai Qiangsheng
Group Co., Ltd. from June 2009 to April 2012. He then served as the manager of the asset operation department
of Shanghai Qiangsheng Group Co., Ltd. from April 2012 to June 2013 and the manager of the asset operation
department at Shanghai Jiushi Properties Co., Ltd. ( ) from June 2013 to May 2015. He
worked at the investment development department of Shanghai Jiushi Corporation ( ) from May
2015 to October 2015, serving as a deputy general manager. He was a deputy general manager of the investment
development department of Shanghai Jiushi (Group) Co., Ltd. from October 2015 to April 2018. Mr. Cao served
as an executive director and the general manager of Shanghai Jiushi Investment Management Co., Ltd. (
) from December 2019 to August 2021. Mr. Cao has been a supervisor of Shanghai Pudong
Development Bank Co., Ltd. ( , listed on the SSE under the stock code of
600000) since December 2019, and a director of Shanghai Sitcom Assets Management Co. Ltd. (
) since September 2021.
Mr. DONG Xiaochun ( ), born in 1964, is a holder of MBA degree and is recognized as a senior
accountant. Mr. Dong has served as a Supervisor of the Guarantor since 20 October 2020. Mr. Dong has been
the chief financial officer of Shanghai Bailian Group Co., Ltd. ( ) (a company listed
on the SSE, stock code: 600827) since May 2020, and the secretary to the board of directors and a director of
Shanghai Bailian Group Co., Ltd. since June 2020. Mr. Dong worked in Shanghai Hualian Commercial Building
( ) as a deputy section chief of the finance section from September 1983 to September 1992. He
served as the chief financial officer and the secretary to the board of directors of Hualian Supermarket Co., Ltd.
155
( ) from October 1992 to August 2004, the chief financial officer of the department store
division of Shanghai Bailian Group Ltd. ( ) from August 2004 to April 2006, the secretary
to the board of directors and the chief financial officer of Shanghai Bailian Group Co., Ltd. from April 2006 to
September 2011, a director of Shanghai Bailian Group Co., Ltd. from April 2010 to April 2011, the secretary to
the board of directors and the chief financial officer of Shanghai Friendship Group Incorporated Company (
) from September 2011 to August 2014, the secretary to the board of directors and the
chief financial officer of Shanghai Bailian Group Co., Ltd. from August 2014 to June 2015, and the chief
financial officer of Bailian Financial Services Co., Ltd. ( , formerly known as Bailian
E-Commerce Co., Ltd. ( )) from June 2015 to May 2020. He has been a director of Lianhua
Supermarket Holdings Co., Ltd. ( ) (a company listed on the Hong Kong Stock Exchange,
stock code: 0980) since June 2020. Mr. Dong was a Supervisor of the Guarantor from July 2007 to July 2015.
Ms. DAI Li ( ), born in 1973, is a holder of master’s degree in law and MBA degree and a mid-level
economist. Ms. Dai has served as a Supervisor of the Guarantor since 18 June 2019. She has served as the head
of the economic management department of Shanghai United Media Group ( ) since July 2022. Ms.
Dai worked as a teaching assistant intern at Nanyang Institute of Technology ( ) from July 1995 to
August 1996, a section member at Nanyang Customs ( ) from August 1996 to August 2000, a legal
counsel, the head of investment and a deputy-director level propagandist of Wenhui Xinmin United Press Group
( ) from July 2002 to October 2013, a deputy-division-director level officer and a deputy
director of the asset operation department of Shanghai United Media Group from October 2013 to June 2018, and
the head of the asset operation department of Shanghai United Media Group from June 2018 to July 2022. Ms.
Dai has served as a director of Shanghai DongJie Advertising Media Co., Ltd. ( )
since June 2016, a director of Shanghai Evening News Media Co., Ltd. ( ) since
November 2017, and an executive director and the legal representative of Shanghai Shenjiang Service Guide Post
Co., Ltd. ( ) since January 2019.
SENIOR MANAGEMENT
The following table sets forth information regarding the senior management of the Guarantor as of the date of
this Offering Circular:
Name Position
Mr. PEI Changjiang ( ) Deputy General Manager
Mr. MAO Yuxing ( ) Deputy General Manager and Chief Information
Officer
Mr. LI Haichao ( ) Deputy General Manager and Chief Compliance
Officer
Mr. CHEN Chunqian ( ) Assistant to the General Manger
Mr. ZHANG Xiangyang ( ) Assistant to the General Manger
Mr. JIANG Chengjun ( ) Assistant to the General Manger and the Secretary to
the Board
Mr. DU Hongbo ( ) Chief Risk Officer
Ms. PAN Guangtao ( ) Assistant to the General Manger
Mr. ZHANG Xinjun ( ) Chief Financial Officer
156
Mr. PEI Changjiang ( ), born in 1965, is a holder of master’s degree in economics. Mr. Pei has served
as a deputy general manager of the Guarantor since he joined the Guarantor in August 2013. Mr. Pei is also the
vice chairman of the Wealth Management Committee of the Guarantor. From July 1993 to July 1996, Mr. Pei
successively held various positions at Shanghai International Securities Co., Ltd., ( ) including
researcher of the research department, assistant to the general manager of Zhabei business department, and
general manager of Zhabei business department. From August 1996 to October 2002, he served as the general
manager of Zhabei business department, a deputy general manager of Zhejiang management headquarters, and
a deputy general manager of the brokerage headquarter of Shenyin Wanguo Securities Co., Ltd. (
). From October 2002 to August 2013, he successively served as the investment director of Fortune Trust
& Investment Co., Ltd. ( ) and a director and the general manager of Fortune SGAM
Fund Management Co., Ltd. ( ). Mr. Pei has been a director of Fullgoal Fund
Management Co., Ltd. ( ) since August 2014, the chairman of the board of directors of
Fullgoal Fund Management Co., Ltd. since March 2019, and the chairman of the board of directors of Shanghai
Haitong Securities Asset Management Company Limited ( ) since November
2014. He served as the chairman of the board of directors of Haitong Futures Corporation ( )
from September 2015 to March 2016, and has been the chairman of the board of directors of Haitong Futures
Co., Ltd. ( ) since March 2016.
Mr. MAO Yuxing ( ), born in 1971, is a holder of doctor’s degree in science and a postdoctoral researcher
in management, and is a senior engineer (professor level). Mr. Mao has served as the chief information executive
officer (currently the “chief information officer”) since September 2016, and a deputy general manager of the
Guarantor since February 2019. Mr. Mao is also the chairman of the IT Management Committee of the Guarantor.
From August 1993 to September 2001, Mr. Mao successively held various positions in the information
technology department of Industrial and Commercial Bank of China Shanghai Municipal Branch including
programmer, deputy section chief, section chief and deputy director. From September 2001 to November 2011,
he worked in the data center (Shanghai) of Industrial and Commercial Bank of China, where he served as an
assistant to the general manager (deputy-division-director level and division-director level) and a member of the
CPC Committee from September 2001 to December 2004, and a deputy general manager and a member of the
CPC Committee from December 2004 to November 2011. From November 2011 to April 2016, he served as a
deputy general manager of the information technology department of Industrial and Commercial Bank of China
Head Office. Mr. Mao is currently a vice chairman of the securities technology committee under the Securities
Association of China ( ), a vice chairman of the Shanghai Fintech Industry Alliance
( ), and a vice chairman of the board of Shanghai Informatization ( ).
Mr. LI Haichao ( ), born in 1968, is a holder of doctor’s degree in economics. Mr. Li joined the Guarantor
in January 2022 and was appointed as a deputy general manager and the chief compliance officer of the
Guarantor by the Board. Mr. Li is also a member of the Wealth Management Committee of the Guarantor. From
July 1990 to February 1994, Mr. Li served as a section member of the Policies and Regulations Restructuring
Department at the former Ministry of Machinery and Electronics Industry ( ); from February 1994
to August 2003, he worked in the former State Commission for Restructuring Economic System (
) and the former State Council Office for Restructuring the Economic System (
), serving successively as a principal section member and a CPC Party Branch Committee member of the
Market Circulation Department, and a principal section member, an associate analyst and a deputy director of the
Industries and Markets Department; from August 2003 to July 2004, he served as a deputy director in the Special
Reform Division I of the Comprehensive Economic Reform Department under the National Development and
Reform Commission ( ). Besides, from December 2002 to July 2004, he took temporary
posts as a member of the leading CPC Party group of the People’s Government and a deputy mayor of Wangqing
County in Jilin Province; from July 2004 to December 2008, he successively served as a deputy-division-director
level officer and a division-director level officer of the Northeast Area Revitalization Office of the State Council
( ); from December 2008 to June 2009, he served as the director of the General Affairs Division
of the Northeast Area Revitalization Department under the National Development and Reform Commission; from
June 2009 to January 2013, he worked at the National Academy of Governance ( ), where he served
successively as a deputy inspector of the Decision-Making Consulting Department, an executive deputy
secretary-general and the CPC branch secretary of the Chinese Society of Administrative Reform (deputy-
bureau- director level, in charge of the daily work); from January 2013 to January 2022, he worked in the CSRC
and successively served as a deputy-bureau-director level officer and a deputy inspector of the research center,
a deputy director of the intermediary and investment fund supervision department, and a deputy director of the
futures supervision department (in charge of the daily work), and also served as a member of the CPC Party
Committee and an executive vice president of China Financial Futures Exchange ( ) (during
which he served as a vice precedent of China Futures Association). Currently, Mr. Li is a vice chairman of the
Compliance Management and Integrity Practice Committee of China Securities Association, the vice chairman
of the board of Shanghai Enterprise Legal Counsel Association, and an executive director of Shanghai Financial
Association.
157
Mr. CHEN Chunqian ( ), born in 1963, is a holder of doctor’s degree in economics. Mr. Chen joined the
Guarantor in October 1997 and has been an assistant to the general manager of the Guarantor since March 2012.
He is responsible for the brokerage business of the Guarantor. Mr. Chen has been entitled to the Guarantor’s
deputy-general-manager level benefits since February 2017. Mr. Chen is also the chairman of the brokerage
committee, the vice chairman of the IT Management Committee, the vice chairman of the Wealth Management
Committee, and a member of the Assets and Liabilities Allocation Committee. He is also a vice chairman of the
Securities Margin Trading Business Committee under the Securities Association of China (
), a vice president of the Shanghai Securities Association ( ), a deputy
director of the Securities Conflict Resolution Committee ( ), and a vice president of
Association of Shanghai Internet Financial Industry ( ). Mr. Chen served in various
positions in the Guarantor, including person-in-charge of the business department of Shenzhen Branch from
October 1997 to January 1998, deputy general manager of the international business department from January
1998 to March 2000, deputy general manager of Shenzhen Branch from March 2000 to December 2000, general
manager of the investment management department (Shenzhen) from December 2000 to May 2006, general
manager of the sales and trading headquarters from May 2006 to February 2013, and general manager of the
institutional business department from November 2007 to March 2009. Mr. Chen has been a director of E-Capital
Transfer Co., Ltd. ( ) since January 2015.
Mr. ZHANG Xiangyang ( ), born in 1965, is a holder of bachelor’s degree in engineering and a senior
economist. Mr. Zhang joined the Guarantor in May 1996 and has been an assistant to the general manager since
December 2014. He has been entitled to the Guarantor’s deputy-general-manager level benefits since January
2021. Mr. Zhang is also the chairman of the PE and Industrial Capital Investment Committee of the Guarantor.
Mr. Zhang previously worked in Xinhua Bookstore in Taiyuan from December 1983 to April 1988, in Shanxi
Radio & TV University ( ) from April 1988 to December 1991, and in Bank of Communications
Taiyuan Branch ( ) from December 1991 to May 1996. Mr. Zhang served in various positions
in the Guarantor, including deputy general manager (in charge of daily work) and general manager of the Taiyuan
business department from May 1996 to April 2002, deputy general manager and general manager of the
integrated business management headquarters from April 2002 to May 2006, and general manager of the risk
control headquarters from May 2006 to October 2008. He served as a director, the general manager and the
chairman of the investment decision-making committee of Haitong Capital Investment Limited (
) from October 2008 to November 2012, a director of Haitong Creative Capital Management Co., Ltd.
( ) from June 2012 to August 2015, the chairman of the board of directors of Haitong
Innovative Capital Management Co., Limited ( ) from November 2011 to July 2015,
the chairman of the board of directors of Haitong Creative Capital Management Co., Ltd. from August 2015 to
March 2016, a director of Haitong New Energy Equity Investment Management Co., Ltd. (
) from July 2013 to May 2016, and the chairman of the board of directors of Haitong New Energy
Equity Investment Management Co., Ltd. from July 2015 to May 2016. Mr. Zhang has been the chairman of the
board of directors and the chairman of the investment decision-making committee of Haitong Capital Investment
Co., Ltd. since November 2012, a director of Haitong Creative Private Equity Fund Management Co., Ltd. (
, formerly known as “Haitong Creative Capital Management Co., Ltd.”) since
March 2016, the chairman of the board of directors of Haitong M&A Capital Management (Shanghai) Co., Ltd.
( ( ) ) since June 2016, and a director of Haitong-Fortis Private Equity Fund
Management Co., Ltd. ( ) since March 2018. Mr. Zhang currently serves as a vice
chairman of the Development and Strategy Committee under the Securities Association of China (
) and a vice president of PE Association of Shanghai ( ).
Mr. JIANG Chengjun ( ), born in 1968, is a holder of master’s degree in economics and an economist.
Mr. Jiang has been an assistant to the general manager and the secretary to the Board of the Guarantor since 29
March 2017, a joint company secretary and a joint authorized representative of the Guarantor since 5 April 2017,
and the general manager of investment banking headquarters of the Guarantor since April 2017. Mr. Jiang
concurrently serves the chairman of the Investment Banking Committee and a member of the Assets and
Liabilities Allocation Committee. Mr. Jiang was a officer at Xiamen ITG Group Co., Ltd. (
) from July 1993 to July 1994, a deputy manager of the finance and securities department, a manager of
investment management and development department, an assistant to the general manager, a secretary to the
board of directors and a deputy general manager of Xiamen Guotai Enterprises Co., Ltd. (
) from July 1994 to August 2000, a deputy general manager in the investment banking department of the
Guarantor from August 2000 to July 2007, a deputy general manager (in charge of operations) in the investment
banking department of the Guarantor from July 2007 to April 2009, and the general manager of investment
banking department of the Guarantor from April 2009 to April 2017.
158
Mr. DU Hongbo ( ), born in 1963, is a holder of bachelor’s degree in engineering and an engineer. Mr.
Du has been the Chief Risk Officer of the Guarantor since May 2017. Mr. Du is also a member of each of the
Assets and Liabilities Allocation Committee, the IT Management Committee, and the Wealth Management
Committee of the Guarantor. Mr. Du worked at Wuhan Computer Application Institute (
) from August 1984 to December 1990, Wuhan Branch of Stone Group Corp. ( )
from December 1990 to August 1992, Wuhan Software Research center ( ) from August 1992
to August 1996, and the information technology center of Guotai Junan Securities Co., Ltd. (
) from August 1996 to March 2002. Mr. Du was an assistant to the general manager of the website
management department of the Guarantor from March 2002 to May 2003, an assistant to the general manager of
the brokerage business headquarters of the Guarantor from May 2003 to May 2005, a deputy general manager
of the integrated business management headquarters of the Guarantor from May 2005 to May 2006. He worked
at the risk control headquarters of the Guarantor from May 2006 to March 2011, successively serving as a deputy
general manager and a deputy general manager (entitled to benefits as general manager). He was the general
manager of the compliance and risk management headquarters of the Guarantor from March 2011 to January
2013, the general manager of OTC department of the Guarantor from January 2013 to February 2014, the general
manager of securities finance department of the Guarantor from February 2014 to March 2017, and the general
manager of the risk management department of the Guarantor from March 2017 to July 2020. Mr. Du was an
employee representative Supervisor of the Guarantor from 16 May 2011 to 30 December 2014. Mr. Du is
currently a member of the risk management committee of the Securities Association of China (
).
Mr. PAN Guangtao ( ), born in 1971, is a holder of MBA degree, an engineer and an assistant economist.
Mr. Pan has been an assistant to the general manager of the Guarantor since May 2017 and the general manager
of the equity investment trading department of the Guarantor since March 2013. Mr. Pan concurrently serves as
the chairman of the Proprietary Trading Decision and FICC Committee and a member of the Assets and
Liabilities Allocation Committee of the Guarantor. Mr. Pan worked as the head of IT at the IT department of
brokerage headquarter of Shenyin Wanguo Securities Co., Ltd. ( ) from July 1994 to July 1998.
He worked at the first securities investment department of the securities investment headquarters of Shenyin
Wanguo Securities Co., Ltd. from July 1998 to July 2002, successively serving as an assistant to manager and
a deputy manager. Mr. Pan worked as an assistant to the general manager of second trading department of the
Guarantor from August 2002 to June 2003. He worked at the trading headquarters of the Guarantor from July
2003 to August 2004, successively serving as an assistant to the general manager and a deputy general manager.
He worked as a deputy general manager of investment management department of the Guarantor from August
2004 to August 2006. He worked at the securities investment department of the Guarantor from August 2006 to
March 2013, successively serving as a deputy general manager and a deputy general manager (in charge of
operations). He has been a non-executive director of Haitong Bank S.A. since November 2015 and a director of
Haitong Innovation Securities Investment Company Limited ( ) since May 2019.
Mr. ZHANG Xinjun ( ), born in 1975, is a holder of master’s degree in management and a senior
accountant. Mr. Zhang joined the Guarantor in July 2001 and has been the chief financial officer of the Guarantor
since 27 March 2018. Mr. Zhang is also a member of the Assets and Liabilities Allocation Committee of the
Guarantor. Mr. Zhang worked at the finance and accounting department of the Guarantor from July 2001 to June
2007, serving in various positions including office clerk and deputy manager and manager of the asset
management department. He has worked at Haitong International Holdings Limited ( )
since July 2007, and has been the head of finance work from July 2007 to February 2009 and the chief financial
officer since March 2009. Mr. Zhang served as the chief financial officer of Haitong International Securities
Group Limited ( , listed on the Hong Kong Stock Exchange under the stock code of
0665) from March 2010 to March 2018. He has been a non-executive director and a member of each of the audit
committee and the strategic development committee of Haitong International Securities Group Limited since
March 2018, a non-executive director of Haitong Bank S.A. since January 2018, a director of Fullgoal Fund
Management Co., Ltd. since February 2019, and a director of Haitong Investment Ireland PLC (
) since February 2020.
159
EXCHANGE RATE INFORMATION
PBOC sets and publishes daily a base exchange rate with reference primarily to the supply and demand of
Renminbi against a basket of currencies in the market during the prior day. PBOC also takes into account other
factors, such as the general conditions existing in the international foreign exchange markets.
On 21 July 2005, the PRC Government introduced a managed floating exchange rate system to allow the value
of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to
a basket of currencies. On the same day, the value of the Renminbi appreciated by 2 per cent. against the U.S.
dollar. The PRC Government has since made and in the future may make further adjustments to the exchange rate
system. On 18 May 2007, PBOC enlarged, effective on 21 May 2007, the floating band for the trading prices in
the inter-bank spot exchange market of Renminbi against the U.S. dollar from 0.3 per cent. to 0.5 per cent. around
the central parity rate. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5 per cent. above
or below the central parity rate published by PBOC. The floating band was further widened to 1.0 per cent. on
16 April 2012. These changes in currency policy resulted in the Renminbi appreciating against the U.S. dollar
by approximately 26.9 per cent. from 21 July 2005 to 31 December 2013. On 14 March 2014, PBOC further
widened the floating band against the U.S. dollar to 2.0 per cent.
On 11 August 2015, PBOC announced to improve the central parity quotations of Renminbi against the U.S.
dollar by authorising market-makers to provide central parity quotations to the China Foreign Exchange Trading
Centre daily before the opening of the interbank foreign exchange market with reference to the interbank foreign
exchange market closing rate of the previous day, the supply and demand for foreign exchange as well as changes
in major international currency exchange rates.
The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar
for the periods presented:
Renminbi per U.S. dollar Noon Buying Rate(1)
Period Period End Average(2) High Low
2015 6.4778 6.2869 6.5932 6.1870
2016 6.8771 6.6549 6.9580 6.4480
2017 6.4773 6.7350 6.9575 6.5063
2018 6.8755 6.6090 6.9737 6.2649
2019 6.9618 6.9014 7.1786 6.6822
2020 6.5250 6.9042 7.1681 6.5208
2021 6.3726 6.4508 6.5716 6.3435
2022 6.8972 6.7290 7.3048 6.3084
September 7.1135 7.0195 7.1990 6.8985
October 7.3048 7.1902 7.3048 7.1103
November 7.0879 7.1812 7.3000 7.0440
December 6.8972 6.9717 7.0424 6.8972
2023
January 6.7540 6.7904 6.9135 6.7010
February 6.9325 6.8380 6.9545 6.7266
March 6.8676 6.8909 6.9630 6.8188
(1) Exchange rates between Renminbi and the U.S. dollar represent the noon buying rates as set forth in the H.10 statistical release of the
Federal Reserve Board.
(2) Annual and semi-annual averages have been calculated from month-end rate. Monthly averages have been calculated using the average
of the daily rates during the relevant period.
160
PRC REGULATIONS
This section is a high-level overview of the PRC legal system and a summary of the principal PRC laws and
regulations relevant to the issue of the Notes by the Issuer and giving of the Guarantee by the Guarantor. As this
is a summary, it does not contain a detailed analysis of the PRC laws and regulations.
MAJOR LAWS AND REGULATIONS
Employment Contracts
The Labour Contract Law ( ), promulgated by the Standing Committee of the National People’s
Congress on 29 June 2007, which became effective on 1 January 2008 and was amended on 28 December 2012
and became effective on 1 July 2013, governs the relationship between employers and employees and provides
for specific provisions in relation to the terms and conditions of an employee contract. The Labour Contract Law
stipulates that employee contracts shall be in writing and signed. It imposes more stringent requirements on
employers in relation to entering into fixed-term employment contracts, hiring of temporary employees and
dismissal of employees. Pursuant to the Labour Contract Law, employment contracts lawfully concluded prior
to the implementation of the Labour Contract Law and continuing as at the date of its implementation shall
continue to be performed. Where an employment relationship was established prior to the implementation of the
Labour Contract Law, but no written employment contract was concluded, a contract shall be concluded within
one month after its implementation.
Employee Funds
Under applicable PRC laws, regulations and rules, including the Social Insurance Law ( ),
promulgated by the Standing Committee of the National People’s Congress on 28 October 2010, which became
effective on 1 July 2011 and as amended on 29 December 2018, the Interim Regulations on the Collection and
Payment of Social Insurance Premiums ( ), promulgated by the State Council on 22
January 1999, which became effective on 22 January 1999 and as amended on 23 March 2019, and
Administrative Regulations on the Housing Provident Fund ( ), promulgated by the State
Council on 3 April 1999, which became effective on 3 April 1999 and as amended on 24 March 2002 and 23
March 2019, employers are required to contribute, on behalf of their employees, to a number of social security
funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance,
occupational injury insurance, maternity leave insurance, and to housing provident funds. These payments are
made to local administrative authorities and any employer who fails to contribute may be fined and ordered to
pay the outstanding amount within a stipulated time period.
REGULATIONS REGARDING OVERSEAS INVESTMENT, FINANCING AND ACQUISITION
ACTIVITIES
CSRC Supervision
According to the Administrative Measures on Establishment, Acquisition and Equity Participation in Business
Operators Overseas by Securities Companies and Securities Investment Fund Management Companies (
) effective from 25 September 2018 and
subsequently being revised on 15 January 2021, where a security company intends to increase capital of its
overseas subsidiaries or to provide financing, guarantee or other similar credit increase measures to its overseas
subsidiaries, it shall perform its internal decision-making and authorization procedures and file the records with
the CSRC within five working days from the date of passing relevant resolutions (the “CSRC filing”). According
to the CSRC supervision notifications it issued from time to time, the CSRC filing shall be reported to the local
CSRC branch.
NDRC Supervision
According to the Administrative Measures for the Outbound Investment by Enterprises ( )
effective from 1 March 2018, sensitive projects to be carried out by investors either directly or through overseas
enterprises controlled thereby shall be subject to the approval of the NDRC. Other projects shall be subject to
the filing with the competent government body.
161
Specifically, overseas investment projects carried out by enterprises under central management, or those carried
out by local enterprises in which the amount of Chinese investment reaches or exceeds U.S.$300 million shall
be subject to the filing with the NDRC. Those carried out by local enterprises in which the amount of Chinese
investment is below U.S.$300 million shall be subject to filing with competent investment departments of the
provincial government.
Investment projects to be carried out in Hong Kong and/or the Macau Special Administrative Region shall be
governed by the Administrative Measures for the Outbound Investment by Enterprises.
According to the NDRC Administrative Measures, which was issued by the NDRC on 5 January 2023 and came
into effect on 10 February 2023, if a PRC enterprise or an offshore enterprise controlled by a PRC enterprise
wishes to issue bonds outside of the PRC with a maturity of more than one year, such enterprise must in advance
of issuing such bonds, file certain prescribed documents with the NDRC and procure a registration certificate
from the NDRC in respect of such issue.
The NDRC Administrative Measures relates to the matters as listed below:
before the issuance of foreign debts, enterprises shall first apply to the NDRC for the handling of the review
and registration procedures and shall report the information on the issuance to NDRC within 10 working days
after enterprises utilise the funds raised by foreign debts (completion of the foreign bonds issuance or each
utilisation of commercial loans). According to the NDRC Administrative Measures, an enterprise is obligated
to: (i) submit with the NDRC the offering information (including, without limitation to, major business
indicators of such enterprise and issue details of the relevant foreign debt) within 10 PRC Business Days
after the completion of the issuance or drawdown of such foreign debt, (ii) submit with the NDRC the
offering information related to the pre-issuance registration within 10 PRC Business Days after the expiry
date of such registration, (iii) submit with the NDRC the requisite information, including, without limitation
to, the use of proceeds, repayment details and plans of the principal and interest, and major business
indicators, within five PRC Business Days before the end of January and July of each year, and (iv) submit
the relevant information with the NDRC promptly upon the occurrence of any material event that may affect
the due performance of debt obligations and take measures to avoid the spillover of default risk and the
cross-default risk of onshore bonds;
review and registration materials to be submitted by an enterprise for the issuance of foreign debts shall
include: application report attached with the relevant documents. The application report shall cover the
following main particulars: (i) basic information, existing foreign debts and compliance of the enterprise; (ii)
analysis of the necessity, feasibility, economy and financial sustainability of the borrowing of foreign debts;
(iii) plan for borrowing foreign debts, including the currency, size, interest rate and maturity of foreign debts,
types of debt instruments, guarantee or other credit enhancement measures, purpose of the funds raised,
contra flow and work plan for borrowing foreign debts; (iv) plan for repayment of the principal and interest
of foreign debts and risk prevention measures; and (v) letter of commitment for the authenticity of the
borrowing of foreign debts by the enterprise;
the NDRC shall decide whether to accept the application for review and registration within 5 working days
of receiving it and shall issue a Certificate for review and Registration of the Issuance of Foreign Debts by
Enterprises within three months of accepting the application and within the limit of the total size of foreign
debts; and
an application for change shall be submitted to the NDRC prior to occurrence of any of the following
circumstances and where adjustment is required: (i) changes in the currency of foreign debts to be borrowed
or the type of debt instruments; (ii) major changes in the use of raised funds; and (iii) other circumstances
under which major adjustments shall be made to the relevant contents of the Certificate for Review and
Registration. The NDRC shall within 20 working days from the date of acceptance of an application for
change, make a written decision on approval of the application with sufficient reasons, or issue a written
notice on non-approval of the change with reasons stated if the application is not sufficiently justified.
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CROSS-BORDER SECURITY LAWS
On 12 May 2014, the SAFE promulgated the Circular concerning Promulgation of the Foreign Exchange
Administration Rules on Cross-Border Guarantees and the Relating Implementation Guidelines (
) (collectively, “Circular 29”). Circular 29, which came into force
on 1 June 2014, replaced 12 other regulations regarding cross-border security and introduces a number of
significant changes, including: (i) abolishing prior SAFE approval and quota requirements for cross-border
security; (ii) requiring SAFE registration or filing for two specific types of cross-border security only; (iii)
removing eligibility requirements for providers of cross-border security; (iv) the validity of any cross-border
security agreement is no longer subject to SAFE approval, registration, filing, and any other SAFE administrative
requirements; (v) removing SAFE verification requirement for performance of cross-border security. A
cross-border guarantee is a form of security under Circular 29. Circular 29 classifies cross-border security into
three types:
Nei Bao Wai Dai ( ) (“NBWD”): security/guarantee provided by an onshore security provider for a
debt owing by an offshore debtor to an offshore creditor.
Wai Bao Nei Dai ( ) (“WBND”): security/guarantee provided by an offshore security provider for
a debt owing by an onshore debtor to an onshore creditor.
Other Types of Cross-border Security ( ): any cross-border security/guarantee other than
NBWD and WBND.
In respect of NBWD, in the case where the onshore security provider is a non-bank institution, it shall conduct
a registration of the relevant security/guarantee with SAFE within 15 PRC Business Days after the execution of
the Deed of Guarantee. In the event of changes to the major clauses of the Deed of Guarantee, it shall conduct
a change registration for the relevant security/guarantee. According to Circular 29, the funds borrowed offshore
shall not be directly or indirectly repatriated to or used onshore by means of loans, equity investments or
securities investments without SAFE approval. According to Circular No. 3 [2017] issued by the SAFE on 26
January 2017, funds for overseas loans under domestic guarantees are allowed to be repatriated into the PRC for
domestic use. Debtors can repatriate, directly or indirectly, the funds under guarantees for domestic use through
issuing loans to or equity participation in domestic institutions. Further, according to the Policy Q&As (Issue II)
on the Circular of the State Administration of Foreign Exchange on Further Advancing the Reform of Foreign
Exchange Administration and Improving Examination of Authenticity and Compliance, in the case where the
offshore debtor transfers the funds borrowed offshore by means of foreign loans onshore, the onshore borrower
shall meet the relevant requirements for foreign debt administration and control the scale of funds repatriated
according to the relevant requirements of the mode of macro-prudential management of full-covered cross-border
financing or the mode required in the Administration Measures for Registration of Foreign Debts. In the case
where the offshore debtor transfers the funds by means of equity investment onshore, it shall meet the
requirements from the competent authorities in the area of foreign direct investment.
Upon enforcement, the onshore security provider can pay to the offshore creditor directly (by effecting
remittance through an onshore bank) where the NBWD has been registered with SAFE. In addition, if any
onshore security provider under a NBWD provides any security or guarantee for an offshore bond issuance, the
offshore issuer’s equity shares must be fully or partially held directly or indirectly by the onshore security
provider. Moreover, the proceeds from any such offshore bond issuance must be applied towards the offshore
project(s), where an onshore entity holds equity interest, and in respect of which the related approval,
registration, record, or confirmation have been obtained from or made with the competent authorities subject to
PRC laws.
The Guarantor will unconditionally and irrevocably guarantee the due payment of all sums expressed to be
payable by the Issuer under the Notes. The Guarantor’s obligations in respect of the Notes will be contained in
the relevant Deed of Guarantee. The Deed of Guarantee will be executed by the Guarantor on or before the
relevant Issue Date. Under Circular 29, the Deed of Guarantee does not require any pre-approval by SAFE and
is binding and effective upon execution. The Guarantor is required to submit the Deed of Guarantee to the local
SAFE for registration within 15 business days after its execution. The SAFE registration is merely a post signing
registration requirement, which is not a condition to the effectiveness of the Guarantee of the Notes.
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Under Circular 29, the local SAFE will go through a procedural review (as opposed to a substantive examination
process) of the Guarantor’s application for registration. Upon completion of the review, the local SAFE will issue
a registration notice or record to the Guarantor to confirm the completion of the registration.
Under Circular 29:
non-registration does not render the Guarantee of the Notes ineffective or invalid under PRC law although
SAFE may impose penalties on the Guarantor if submission for registration is not carried out within the
stipulated time frame of 15 business days; and
there may be logistical hurdles at the time of remittance (if any cross-border payment is to be made by the
Guarantor under the Guarantee of the Notes) as domestic banks require evidence of SAFE registration in
order to effect such remittance, although this does not affect the validity of the Guarantee of the Notes itself.
The Terms and Conditions of the Notes provide that the Guarantor will within the prescribed timeframe after the
execution of the Deed of Guarantee, file or cause to be filed with SAFE the Cross-Border Security Registration.
The Guarantor shall use its best endeavours to complete the Cross-Border Security Registration and obtain a
registration certificate from SAFE (or any other document evidencing the completion of registration issued by
SAFE) on or before the Registration Deadline (being 270 PRC Business Days after the relevant Issue Date) and
shall comply with all applicable PRC laws and regulations in relation to the issue of the Notes and the Guarantee.
If the Guarantor fails to provide the Trustee with the SAFE Registration Documents by the Registration Deadline,
the Noteholders will have a put option to require the Issuer to redeem the Notes held by them at their principal
amount together with any accrued and unpaid interest (see Condition 6(d) (Redemption for Relevant Events)).
MOFCOM SUPERVISION
MOFCOM issued the new version of the Overseas Investment Administration Rules ( ) on 6
September 2014, effective from 6 October 2014 (the “New Overseas Investment Rules”). Under the New
Overseas Investment Rules, a domestic enterprise intending to carry out any overseas investment shall report to
the competent department of commerce for verification or filing and the competent department of commerce
shall, with regard to an enterprise so verified or filed, issue thereto an Enterprise Overseas Investment Certificate
( ). If two or more enterprises make joint investment to establish an overseas enterprise, the
larger (or largest) shareholder shall be responsible for the verification or filing procedure after obtaining written
consent of other investing parties.
An enterprise that intends to invest in a sensitive country or region or a sensitive industry shall apply for the
verification by MOFCOM. “Sensitive countries and regions” refer to those countries without a diplomatic
relationship with the PRC, or subject to the UNSC sanctions or otherwise under the list of verified countries and
regions published by MOFCOM from time to time. “Sensitive industries” refer to those industries involving the
products and technologies which are restricted from being exported, or affecting the interests of more than one
country (or region). In accordance with the New Overseas Investment Rules, a central enterprise shall apply to
MOFCOM for verification and MOFCOM shall, within 20 working days after accepting such application, decide
whether or not the verification is granted. For a local enterprise, it shall apply through the provincial department
of commerce to MOFCOM for such verification. The provincial department of commerce shall give a preliminary
opinion within 15 working days after accepting such local enterprise’s application, and submit all application
documents to MOFCOM. MOFCOM shall decide whether or not to grant the verification within 15 working days
of receipt of such preliminary opinion from the provincial department of commerce. Upon verification, the
Enterprise Overseas Investment Certificate shall be issued to the investing enterprise by MOFCOM.
All overseas investments other than those subject to MOFCOM verification as described above are subject to a
filing procedure. The investing enterprise shall complete the filing form through the Overseas Investment
Management System, an online system maintained by MOFCOM, print out a copy of such filing form for
stamping with the company chop, and then submit such stamped filing form together with a copy of its business
licence for filing at MOFCOM (for a central enterprise ( )) or the provincial department of commerce
(for a local enterprise) respectively.
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MOFCOM or the provincial department of commerce shall accept the filing and issue the Enterprise Overseas
Investment Certificate within three working days upon receipt of such filing form.
The investing enterprise must carry out the investment within two years of the date of the relevant Enterprise
Overseas Investment Certificate, otherwise such certificate will automatically become invalid and a new filing
or verification application has to be made by the investing enterprise. In addition, if any item specified in such
certificate is changed, the investing enterprise shall make the change of registration at MOFCOM or the
provincial department of commerce (as the case may be).
If an overseas invested company carries out a re-investment activity offshore, the investing enterprise shall report
such re-investment activity to MOFCOM or the provincial department of commerce (as the case may be) after
the legal process of the investment is completed offshore. The investing enterprise shall complete and print out
a copy of the Overseas Chinese-invested Enterprise Re-investment Report Form ( )
from the Overseas Investment Management System and stamp and submit such form to MOFCOM or the
provincial department of commerce.
Foreign Exchange Administration
According to Circular 13 and its appendix, the banks will review and carry out foreign exchange registration
under overseas direct investment directly.
According to the Administrative Measures for Foreign Debt Registration and its operating guidelines, effective
as at 13 May 2013, issuers of foreign debts are required to register with the SAFE. Issuers other than banks and
financial departments of the government shall go through registration or record-filing procedures with the local
branch of the SAFE within 15 business days of entering into a foreign debt agreement. If the receipt and payment
of funds related to the foreign debt of such issuer is not handled through a domestic bank, the Issuer shall, in
the event of any change in the amount of money withdrawn, principal and interest payable or outstanding debt,
go through relevant record-filing procedures with the local branch of the SAFE.
On 12 January 2017, the PBOC issued the Notice of People’s Bank of China on Matters Concerning
Macro-prudential Management on All-round Cross-border Financing (Yin Fa [2017] No. 9) (
), which came into effect on the same date and established a
mechanism aimed at regulating cross border financing activities based on the capital or net asset of the borrowing
entities using a prudent management principle on a macro nationwide scale.
REMITTANCE OF RENMINBI INTO AND OUTSIDE THE PRC
The Renminbi is not a freely convertible currency. The remittance of Renminbi into and outside the PRC is
subject to controls imposed under PRC law.
Current Account Items
Under PRC foreign exchange control regulations, current account item payments include payments for imports
and exports of goods and services, payments of income and current transfers into and outside the PRC.
Prior to July 2009, all current account items were required to be settled in foreign currencies. On July 2009, the
PRC Government promulgated Measures for the Administration of the Pilot Programme of Renminbi Settlement
of Cross-Border Trades ( ) (the “Measures”) and its implementation rules,
pursuant to which designated and eligible enterprises are allowed to settle their cross-border trade transactions
in Renminbi. Since July 2009, subject to the Measures and its implementation rules, the PRC has commenced
a scheme pursuant to which Renminbi may be used for settlement of cross-border trade between approved pilot
enterprises in five designated cities in the PRC including Shanghai, Guangzhou, Dongguan, Shenzhen and
Zhuhai and enterprises in designated offshore jurisdictions including Hong Kong and Macau. On 17 June 2010,
the PRC Government promulgated the Circular on Issues concerning the Expansion of the Scope of the Pilot
Programme of Renminbi Settlement of Cross-Border Trades (
), pursuant to which (i) the list of designated pilot districts was expanded to cover 20 provinces including
Beijing, Shanghai, Tianjin, Chongqing, Guangdong, Jiangsu, Zhejiang, Liaoning, Shandong and Sichuan, and (ii)
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the restriction on designated offshore districts was lifted. Accordingly, any enterprises in the designated pilot
districts and offshore enterprises are entitled to use Renminbi to settle any current account items between them
(except in the case of payments for exports of goods from the PRC, such Renminbi remittance may only be
effected by approved pilot enterprises in 16 provinces within the designated pilot districts in the PRC). On 1
August 2011, the PRC Government promulgated the Circular on the Expansion of the Regions of Renminbi
Settlement of Cross-Border Trades ( ), pursuant to which the list of
designated pilot districts was expanded to the whole country. On 3 February 2012, the PRC Government
promulgated the Circular on the Relevant Issues Pertaining to Administration over Enterprises Engaging in RMB
Settlement of Export of Goods ( ), pursuant to which any
enterprises in China which are qualified to engage in import and export trade are allowed to settle their goods
export trade in Renminbi. On 23 March 2018, PBOC promulgated Issuance of Notice of People’s Bank of China
on Business Rules of Cross Border Interbank Payment System (
). The notice regulates cross border interbank payment conducts, clarifies management rules on
participants and protects legitimate rights of operating institutions and participants of cross border interbank
payment system. On 5 January 2018, the PBOC promulgated Notice of the People’s Bank of China on Further
Improving Policies of Cross-Border RMB Business to Promote Trade and Investment Facilitation (Yin Fa [2018]
No. 3) ( ) ( [2018]3 ]). The Yin
Fa [2018] No. 3 provides any cross-border transactions that use a foreign exchange currency can use Renminbi
for settlement. Domestic enterprises which issue RMB bonds abroad may, upon completing relevant formalities
in accordance with macro-prudential regulations on comprehensive cross-border financing, remit the funds raised
overseas to the PRC for their use as actually needed. The RMB funds raised by domestic enterprises through
issuing overseas shares may be remitted to China for use upon actual demands.
The Measures and the subsequent circulars will be subject to interpretation and application by the relevant PRC
authorities. Local authorities may adopt different practices in applying the Measures and impose conditions for
settlement of current account items.
Capital Account Items
Under PRC foreign exchange control regulations, capital account items include cross-border transfers of capital,
direct investments, securities investments, derivative products and loans. Capital account payments are generally
subject to approval of the relevant PRC authorities. Capital account items are generally required to be made in
foreign currencies. For instance, foreign investors (including any Hong Kong investors) are generally required
to make any capital contribution to foreign invested enterprises in a foreign currency in accordance with the
terms set out in the relevant joint venture contracts and/or articles of association as approved by the relevant
authorities. Foreign invested enterprises or any other relevant PRC parties are also generally required to make
capital account item payments including proceeds from liquidation, transfer of shares, reduction of capital and
principal repayment under foreign debt to foreign investors in a foreign currency. That said, the relevant PRC
authorities may approve a foreign entity to make a capital contribution or shareholder’s loan to a foreign invested
enterprise with Renminbi lawfully obtained by it outside the PRC and for the foreign invested enterprise to
service interest and principal repayment to its foreign investor outside the PRC in Renminbi on a trial basis. The
foreign invested enterprise may also be required to complete registration and verification process with the
relevant PRC authorities before such Renminbi remittances.
On 7 April 2011, the SAFE issued the Notice on Relevant Issues regarding Streamlining the Business Operation
of Cross-border Renminbi Capital Account Items, which clarifies, among other things, that the borrowing by an
onshore entity (including a financial institution) of Renminbi loans from an offshore creditor shall in principle
follow the current regulations on borrowing foreign debts and the provision by an onshore entity (including a
financial institution) of external guarantee in Renminbi shall in principle follow the current regulations on the
provision of external guarantee in foreign currencies.
On 3 June 2011, the PBOC promulgated the Circular on Clarifying Issues concerning Cross-border Renminbi
Settlement ( ) (the “PBOC Circular”). The PBOC
Circular provides instructions to local PBOC authorities on procedures for the approval of settlement activities
for non-financial Renminbi foreign direct investment into the PRC. The PBOC Circular applies to all
non-financial Renminbi foreign direct investment into the PRC, and includes investment by way of establishing
a new enterprise, acquiring an onshore enterprise, transferring the shares, increasing the registered capital of an
existing enterprise, or providing loan facilities in Renminbi. The domestic settlement banks of foreign investors
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or foreign invested enterprises in the PRC are required to submit written applications to the relevant local PBOC
authorities which include, inter alia, requisite approval letters issued by the relevant MOFCOM authorities. The
PBOC Circular only applies to cases where the receiving onshore enterprise is not a financial institution. On 13
October 2011, the PBOC issued the PBOC FDI Measures, to commence the PBOC’s detailed RMB FDI
administration system, which covers almost all aspects of RMB FDI, including capital injection, payment of
purchase price in the acquisition of PRC domestic enterprises, repatriation of dividends and distribution, as well
as RMB denominated cross-border loans. Under the PBOC FDI Measures, special approval for RMB FDI and
shareholder loans from the PBOC which was previously required by the PBOC Circular is no longer necessary.
On 14 June 2012, the PBOC issued the Notice on Clarifying the implementation of Settlement of Cross-Border
Renminbi Direct Investment ( ), which
provides more detailed rules for cross-border Renminbi direct investments and settlements.
On 5 July 2013, PBOC promulgated the Notice on Simplifying the Procedures of Cross-border Renminbi
Business and Improving Relevant Policies (the “PBOC Notice”), which simplifies the operating procedures on
current account cross-border Renminbi settlement and further publishes policies with respect to issuance of
offshore Renminbi bonds by onshore non-financial institutions. The PBOC Notice intends to improve the
efficiency of cross-border Renminbi settlement and facilitate the use of cross-border Renminbi settlement by
banks and enterprises.
On 3 December 2013, MOFCOM promulgated the MOFCOM Circular, which has become effective on 1 January
2014, to further facilitate FDI by simplifying and streamlining the applicable regulatory framework. Pursuant to
the MOFCOM Circular, the competent counterpart of MOFCOM will grant written approval for each FDI and
specify “Renminbi Foreign Direct Investment” and the amount of capital contribution in the approval. Unlike
previous MOFCOM regulations on FDI, the MOFCOM Circular removes the approval requirement for changes
in the relevant joint venture contract or the articles of association of the joint venture company where foreign
investors change the currency of its existing capital contribution from a foreign currency to Renminbi. In
addition, the MOFCOM Circular also clearly prohibits the FDI funds from being used for any direct or indirect
investment in securities and financial derivatives (except for strategic investment in the PRC listed companies)
or for entrustment loans in the PRC. On 9 June 2016, the SAFE issued the SAFE Notice, which clarifies, among
other things, as for foreign exchange income of capital account which implement the “at-will” foreign exchange
settlement according to relevant regulations, domestic enterprises can complete the settlement in banks according
to the actual operation.
As the MOFCOM Circular, the PBOC FDI Measures and SAFE Notice are relatively new rules, they will be
subject to interpretation and application by the relevant PRC authorities.
Further, if any new PRC regulations are promulgated in the future which have the effect of permitting or
restricting (as the case may be) the remittance of Renminbi for payment of transactions categorised as capital
account items, then such remittances will need to be made subject to the specific requirements or restrictions set
out in such rules.
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TAXATION
The following summary of tax consequences of the purchase, ownership and disposition of Notes in certain
jurisdictions is based upon applicable laws, regulations, rulings and decisions in effect as at the date of this
Offering Circular, all of which are subject to change (possibly with retroactive effect). This discussion does not
purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to
purchase, own or dispose of Notes and does not purport to deal with consequences applicable to all categories
of investors, some of which may be subject to special rules. Neither these statements nor any other statements
in this Offering Circular are to be regarded as advice on the tax position of any Noteholder or any persons
acquiring, selling or otherwise dealing in the Notes or on any tax implications arising from the acquisition, sale
or other dealings in respect of the Notes. Persons considering the purchase of the Notes should consult their own
tax advisors concerning the tax consequences of the purchase, ownership and disposition of Notes. Prospective
investors should consult their professional advisers on the possible tax consequences of buying, holding or
selling any Notes under the laws of their country of citizenship, residence or domicile.
PRC
The following summary accurately describes the principal PRC tax consequences of ownership of the Notes by
beneficial owners who, or which, are not PRC residents for PRC tax purposes. These beneficial owners are
referred to as non-PRC Noteholders in this “Taxation – PRC” section. In considering whether to invest in the
Notes, investors should consult their individual tax advisors with regard to the application of PRC tax laws to
their particular situations as well as any tax consequences arising under the laws of any other tax jurisdiction.
Reference is made to PRC taxes from the taxable year beginning on or after 1 January 2008.
Pursuant to the EIT Law, enterprises that are established under laws of foreign countries and regions (including
Hong Kong, Macau and Taiwan) but whose “de facto management organisation” are within the territory of the
PRC shall be PRC tax resident enterprises for the purpose of the EIT Law and they shall pay enterprise income
tax at the rate of 25 per cent. in respect of their income sourced from both within and outside the PRC. If the
relevant PRC tax authorities decide, in accordance with applicable tax rules and regulations, that the Issuer’s “de
facto management organisation” is within the territory of the PRC, it may be held to be a PRC tax resident
enterprise for the purpose of the EIT Law and be subject to enterprise income tax at the rate of 25 per cent. for
its income sourced from both within and outside the PRC. As at the date of this Offer Circular, the Issuer
confirms that it has not received notice or has been informed by the PRC tax authorities that it is considered as
a PRC tax resident enterprise for the purpose of the EIT Law. However, there is no assurance that the Issuer will
not be treated as a PRC tax resident enterprise under the EIT Law and related implementation regulations in the
future.
Pursuant to the EIT Law and its implementation regulations, any non-resident enterprise without an
establishment within the PRC or whose income has no actual connection to its establishment within the PRC,
shall be required to pay an income tax at the rate of 10 per cent. on the income sourced inside the PRC. Such
income tax shall be withheld by the PRC payer that is acting as the obligatory withholder and such PRC payer
shall withhold the tax amount from each payment or payment due. Although as confirmed by the Issuer, as at the
date of this Offering Circular, the Issuer has not been notified or informed by the PRC tax authorities that it is
considered as a PRC tax resident enterprise for the purpose of the EIT Law, in the event the Issuer is deemed
to be a PRC tax resident enterprise by the PRC tax authorities in the future, it will be required to withhold income
tax from the payments of interest in respect of the Notes for any non-PRC Noteholder.
In addition, in the event that the Guarantor is required to discharge its obligations under the Guarantee, the
Guarantor will be obliged to withhold PRC enterprise income tax at a rate of 10 per cent. for non-resident
enterprise Noteholders and at a rate of 20 per cent. for non-resident individual Noteholders on the payments of
interest made by it under the Guarantee to relevant Noteholders as such payments of interest will be regarded
as being derived from sources within the PRC. To the extent that the PRC has entered into arrangements relating
to the avoidance of double taxation with any jurisdiction, such as Hong Kong, that allow a lower rate of
withholding tax, such lower rate may apply to qualified non-resident Noteholders.
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Under the EIT Law and its implementation rules, any gains realised on the transfer of the Notes by holders who
are deemed under the EIT Law as non-resident enterprises may be subject to PRC enterprise income tax if such
gains are regarded as income derived from sources within the PRC. Under the EIT Law, a “non-resident
enterprise” means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual
administrative organisation is not in the PRC, which has established offices or premises in the PRC, or which
has not established any offices or premises in the PRC but has obtained income derived from sources within the
PRC. There remains uncertainty as to whether the gains realised on the transfer of the Notes by enterprise holders
would be treated as incomes derived from sources within the PRC and be subject to PRC enterprise income tax.
There is uncertainty as to whether gains realised on the transfer of the Notes by individual holders who are not
PRC citizens or residents will be subject to PRC individual income tax. If such gains are subject to PRC income
tax, the 10 per cent. enterprise income tax rate and 20 per cent. individual income tax rate will apply respectively
unless there is an applicable tax treaty or arrangement that reduces or exempts such income tax. According to
the double taxation arrangement between China and Hong Kong and relevant PRC tax regulations, residents of
Hong Kong will not be subject to PRC tax on any capital gains from a sale or exchange of the Notes.
On 23 March 2016, the Ministry of Finance and the State Administration of Taxation issued the Circular of Full
Implementation of Business Tax to Value-added Tax Reform (Cai Shui [2016] No. 36) (
( [2016]36 )) (“Circular 36”) which introduced a new value-added tax (“VAT”)
from 1 May 2016. VAT is applicable where entities or individuals provide services within the PRC. The services
are treated as being provided within PRC where either the service provider or the service recipient is located in
PRC. The services subject to VAT include the provision of financial services such as the provision of loans. It
is further clarified under Circular 36 that the “loans” refers to the activity of lending capital for another’s use
and receiving the interest income thereon.
There is no assurance that the Issuer will not be treated as PRC tax residents. PRC tax authorities could take the
view that the Noteholders are providing loans within the PRC because the Issuer is treated as PRC tax residents
or because the Guarantor is located in PRC. In which case, the issuance of the Notes could be regarded as the
provision of financial services within the PRC that is subject to VAT at the rate of 6 per cent. when receiving
the interest payments under the Notes. Pursuant to Interim Regulation of the PRC on City Maintenance and
Construction Tax ( (2011 )), Interim Provisions on the Collection of
Educational Surcharges ( (2011 )), Notice of the Ministry of Finance on the
Relevant Matters regarding Unifying the Policies on Local Education Surcharges (
) and based on consultation with the Shanghai local taxation bureau, a city maintenance and
construction tax (7 per cent.), an educational surcharge (3 per cent.) and a local educational surcharge (2 per
cent.) will be applicable when entities and individuals are obliged to pay VAT (for an aggregate of 6.72 per cent.
on any VAT payable).
VAT is unlikely to be applicable to any transfer of Notes between entities or individuals located outside of the
PRC and therefore unlikely to be applicable to gains realised upon such transfers of the Notes, but there is
uncertainty as to the applicability of VAT if either the seller or buyer of the Notes is located inside the PRC.
Circular 36 together with other laws and regulations pertaining to VAT are relatively new, the interpretation and
enforcement of such laws and regulations involve uncertainties.
However, despite the withholding of the PRC tax by the Issuer or the Guarantor, the Issuer and the Guarantor
have agreed to pay additional amounts to Noteholders so that Noteholders would receive the full amount of the
scheduled payment, as further set out in “Terms and Conditions of the Notes – Taxation”.
No PRC stamp duty will be imposed on non-PRC Noteholders either upon issuance of the Notes or upon a
subsequent transfer of Notes to the extent that the register of Noteholders is maintained outside the PRC and the
issuance and the sale of the Notes is made outside of the PRC.
HONG KONG
Withholding tax
No withholding tax is payable in Hong Kong in respect of payments of principal or interest on the Notes or in
respect of any capital gains arising from the sale of the Notes.
Profits tax
Hong Kong profits tax is chargeable on every person carrying on a trade, profession or business in Hong Kong
in respect of profits arising in or derived from Hong Kong from such trade, profession or business (excluding
profits arising from the sale of capital assets).
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Interest on the Notes may be deemed to be profits arising in or derived from Hong Kong from a trade, profession
or business carried on in Hong Kong in the following circumstances:
(i) interest on the Notes is derived from Hong Kong and is received by or accrues to a corporation carrying on
a trade, profession or business in Hong Kong;
(ii) interest on the Notes is derived from Hong Kong and is received by or accrues to a person, other than a
corporation, carrying on a trade, profession or business in Hong Kong and is in respect of the funds of that
trade, profession or business;
(iii) interest on the Notes is received by or accrues to a financial institution (as defined in the Inland Revenue
Ordinance (Cap. 112) of Hong Kong (the “IRO”)) and arises through or from the carrying on by the financial
institution of its business in Hong Kong; or
(iv) interest on the Notes is received by or accrues to a corporation, other than a financial institution, and arises
through or from the carrying on in Hong Kong by the corporation of its intra-group financing business
(within the meaning of section 16(3) of the IRO).
Sums received by or accrued to a financial institution by way of gains or profits arising through or from the
carrying on by the financial institution of its business in Hong Kong from the sale, disposal and redemption of
Notes will be subject to Hong Kong profits tax. Sums received by or accrued to a corporation, other than a
financial institution, by way of gains or profits arising through or from the carrying on in Hong Kong by the
corporation of its intra-group financing business (within the meaning of section 16(3) of the IRO) from the sale,
disposal or other redemption of Notes will be subject to Hong Kong profits tax.
Sums derived from the sale, disposal or redemption of Notes will be subject to Hong Kong profits tax where
received by or accrued to a person, other than a financial institution, who carries on a trade, profession or
business in Hong Kong and the sum has a Hong Kong source unless otherwise exempted. The source of such
sums will generally be determined by having regard to the manner in which the Notes are acquired and disposed
of.
In addition, the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Ordinance 2022
(Cap. 112) of Hong Kong (the “Amendment Ordinance”) came into effect on 1 January 2023. Under the
Amendment Ordinance, certain foreign-sourced interest on the Bonds and gains from the sale, disposal or
redemption of Notes accrued to an MNE entity (as defined in the Amendment Ordinance) carrying on a trade,
profession or business in Hong Kong are regarded as arising in or derived from Hong Kong and subject to Hong
Kong profits tax when they are received in Hong Kong. The Amendment Ordinance also provides for relief
against double taxation in respect of certain foreign-sourced income and transitional matters.
In certain circumstances, Hong Kong profits tax exemptions (such as concessionary tax rates) may be available.
Investors are advised to consult their own tax advisors to ascertain the applicability of any exemptions to their
individual position.
Stamp Duty
Stamp duty will not be payable on the issue of Bearer Notes provided that either:
(i) such Bearer Notes are denominated in a currency other than the currency of Hong Kong and are not repayable
in any circumstances in the currency of Hong Kong; or
(ii) such Bearer Notes constitute loan capital (as defined in the Stamp Duty Ordinance (Cap. 117) of Hong Kong
(the “SDO”)).
If stamp duty is payable, it is payable by the Issuer on the issue of Bearer Notes at a rate of 3 per cent. of the
market value of the Bearer Notes at the time of issue. No stamp duty will be payable on any subsequent transfer
of Bearer Notes.
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No stamp duty is payable on the issue of Registered Notes. Stamp duty may be payable on any transfer of
Registered Notes if the relevant transfer is required to be registered in Hong Kong. Stamp duty will, however,
not be payable on any transfer of Registered Notes provided that either:
(i) such Registered Notes are denominated in a currency other than the currency of Hong Kong and are not
repayable in any circumstances in the currency of Hong Kong; or
(ii) such Registered Notes constitute loan capital (as defined in the SDO).
Notwithstanding the above, no stamp duty is payable on the transfer of a regulatory capital security (as defined
in Section 17A of the IRO.
With effect from 1 August 2021, if stamp duty is payable in respect of the transfer of Registered Notes it will
be payable at the rate of 0.26 per cent. (of which 0.13 per cent. is payable by the seller and 0.13 per cent. is
payable by the purchaser) normally by reference to the consideration or its value, whichever is higher. In
addition, stamp duty is payable at the fixed rate of HK$5 on each instrument of transfer executed in relation to
any transfer of the Registered Notes if the relevant transfer is required to be registered in Hong Kong.
BRITISH VIRGIN ISLANDS
The Issuer is exempted from all provisions of the Income Tax Ordinance of the British Virgin Islands.
Payment of principal, premium or interest in respect of the Notes to persons who are not resident in the British
Virgin Islands are not subject to British Virgin Islands tax or withholding tax.
Capital gains realised with respect to the Notes by persons who are not persons resident in the British Virgin
Islands are also exempt from all provisions of the Income Tax Ordinance of the British Virgin Islands. No estate,
inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in
the British Virgin Islands with respect to the Notes.
All instruments relating to transactions in respect of the Notes are exempt from payment of stamp duty in the
British Virgin Islands. This assumes that the Issuer does not hold an interest in real estate in the British Virgin
Islands.
FATCA
Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a
“foreign financial institution” may be required to withhold on certain payments it makes (“foreign passthru
payments”) to persons that fail to meet certain certification, reporting, or related requirements. The Issuer may
be a foreign financial institution for these purposes. A number of jurisdictions (including the British Virgin
Islands) have entered into, or have agreed in substance to, intergovernmental agreements with the United States
to implement FATCA (“IGAs”), which modify the way in which FATCA applies in their jurisdictions. Under the
provisions of IGAs as currently in effect, a foreign financial institution in an IGA jurisdiction would generally
not be required to withhold under FATCA or an IGA from payments that it makes. Certain aspects of the
application of the FATCA provisions and IGAs to instruments such as the Notes, including whether withholding
would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes,
are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA
with respect to payments on instruments such as the Notes, such withholding would not apply prior to the date
that is two years after the date on which final regulations defining “foreign passthru payments” are published in
the U.S. Federal Register, and Notes characterised as debt (or which are not otherwise characterised as equity
and have a fixed term) for U.S. federal tax purposes that are issued on or prior to the date that is six months after
the date on which final regulations defining “foreign passthru payments” are filed with the U.S. Federal Register
generally would be “grandfathered” for purposes of FATCA withholding unless materially modified after such
date. However, if additional Notes (as described under “Terms and Conditions of the Notes – Further Issues”)
that are not distinguishable from previously issued Notes are issued after the expiration of the grandfathering
period and are subject to withholding under FATCA, then withholding agents may treat all Notes, including the
Notes offered prior to the expiration of the grandfathering period, as subject to withholding under FATCA.
Holders should consult their own tax advisors regarding how these rules may apply to their investment in the
Notes. In the event any withholding would be required pursuant to FATCA or an IGA with respect to payments
on the Notes, no person will be required to pay additional amounts as a result of the withholding.
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PRC CURRENCY CONTROLS
The following is a general description of certain currency controls in the PRC and is based on the law and
relevant interpretations thereof in effect as at the date of this Offering Circular, all of which are subject to
change, and does not constitute legal advice. It does not purport to be a complete analysis of all applicable
currency controls in the PRC relating to the Notes. Prospective holders of Notes who are in any doubt as to PRC
currency controls are advised to consult their own professional advisers.
Renminbi is not a freely convertible currency. The remittance of Renminbi into and outside the PRC is subject
to controls imposed under PRC law.
CURRENT ACCOUNT ITEMS
Under PRC foreign exchange control regulations, current account items refer to any transaction for international
receipts and payments involving goods, services, earnings and other frequent transfers.
Prior to July 2009, all current account items were required to be settled in foreign currencies with limited
exceptions. Following progressive reforms, Renminbi settlement of imports and exports of goods and of services
and other current account items became legally permissible nationwide as from July 2011. Since July 2013, the
procedures for cross-border Renminbi trade settlement under current account items have been simplified, further,
since June 2015, trades through e-commerce can also be settled under in Renminbi under the current regulatory
regime. A cash pooling arrangement for qualified multinational enterprise group companies was introduced in
late 2014, under which a multinational enterprise group can process cross-border Renminbi payments and
receipts for current account items on a collective basis for eligible member companies in the group. In addition,
the eligibility requirements for multinational enterprise groups have been lowered and the cap for net cash inflow
has been increased in September 2015. The PBOC also permits enterprises in China (Shanghai) Pilot Free Trade
Zone to establish an additional cash pool in the local scheme in the China (Shanghai) Pilot Free Trade Zone, but
each onshore company within the group may only elect to participate in one cash pooling programme. In
November 2016, PBOC Shanghai Headquarters further allowed banks in Shanghai to provide multinational
enterprise groups with services of full-function onshore cash pooling, which will enable broader scope for
utilising pooled cash.
The regulations referred to above are subject to interpretation and application by the relevant PRC authorities.
Local authorities may adopt different practices in applying these regulations and impose conditions for
settlement of current account items.
CAPITAL ACCOUNT ITEMS
Under PRC foreign exchange control regulations, capital account items include cross-border transfers of capital,
direct investments, securities investments, derivative products and loans. Capital account payments are generally
subject to approval of, and/or registration or filing with, the relevant PRC authorities.
Until recently, settlement of capital account items, for example, the capital contribution of foreign investors to
foreign invested enterprises in the PRC, was generally required to be made in foreign currencies. Under
progressive reforms, foreign enterprises are now permitted to use Renminbi to settle all capital account items that
can be settled in foreign currencies. Cross-border Renminbi payment infrastructure and trading facilities are
being improved. Approval, registration and filing requirements specifically for capital account payments in
Renminbi are being removed gradually.
PRC entities are also permitted to borrow Renminbi-denominated loans from foreign lenders (which are referred
to as “foreign debt”) and lend Renminbi-denominated loans to foreign borrowers (which are referred to as
“outbound loans”), as long as such PRC entities have the necessary quota, approval or registration.
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PRC entities may also denominate security or guarantee arrangements in Renminbi and make Renminbi payments
thereunder to parties in the PRC as well as other jurisdictions (which is referred to as “cross-border security”).
Under current rules promulgated by SAFE and PBOC, foreign debts borrowed, outbound loans extended, and the
cross-border security provided by a PRC onshore entity (including a financial institution) in Renminbi shall, in
principle, be regulated under the current PRC foreign debt, outbound loan and cross-border security regimes
applicable to foreign currencies. After piloting in the free trade zones, the PBOC and SAFE launched a
nation-wide system of macro-prudential management on cross-border financing in 2016, which provides for a
unified regime for financings denominated in both foreign currencies and Renminbi.
Since September 2015, qualified multinational enterprise groups can extend Renminbi-denominated loans to, or
borrow Renminbi-denominated loans from, eligible offshore member entities within the same group by
leveraging the cash pooling arrangements. The Renminbi funds will be placed in a special deposit account and
may not be used to invest in stocks, financial derivatives, or non-self-use real estate assets, or purchase wealth
management products or extend loans to enterprises outside the group. Enterprises within China (Shanghai) Pilot
Free Trade Zone may establish another cash pool under China (Shanghai) Pilot Free Trade Zone rules to extend
inter-company loans, although Renminbi funds obtained from financing activities may not be pooled under this
arrangement.
The securities markets, specifically the RQFII regime and the China Interbank Bond Market (“CIBM”), have
been further liberalised for foreign investors. The PBOC has relaxed the quota control for RQFII, and has also
expanded the list of eligible foreign investors in CIBM, removed quota restriction, and granted more flexibility
for the settlement agents to provide the relevant institutions with more trading facilities (for example, in relation
to derivatives for hedging foreign exchange risk).
Interbank foreign exchange market is also opening-up. In January 2016, CFETS set forth qualifications,
application materials and procedure for foreign participating banks (which needs to have a relatively large scale
of Renminbi purchase and sale business and international influence) to access the inter-bank foreign exchange
market.
Recent reforms introduced were aimed at controlling the remittance of Renminbi for payment of transactions
categorised as capital account items. There can be no assurance that the PRC Government will continue to
gradually liberalise the control over Renminbi payments of capital account item transactions in the future. The
relevant regulations are relatively new and will be subject to interpretation and application by the relevant PRC
authorities. Further, if any new PRC regulations are promulgated in the future which have the effect of permitting
or restricting (as the case may be) the remittance of Renminbi for payment of transactions categorised as capital
account items, then such remittances will need to be made subject to the specific requirements or restrictions set
out in such rules.
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SUBSCRIPTION AND SALE
The Dealers have, in a dealer agreement dated 26 April 2023 and as further amended, restated and/or
supplemented from time to time (the “Dealer Agreement”), agreed with the Issuer and the Guarantor a basis on
which they or any of them may from time to time agree to subscribe Notes. Any such agreement will extend to
those matters stated under “Terms and Conditions of the Notes”. Under the terms of the Dealer Agreement, the
Issuer, failing whom the Guarantor, will pay each relevant Dealer a commission (if any) agreed between the
Issuer, the Guarantor and the relevant Dealer in respect of Notes subscribed by it. The Issuer and the Guarantor
have agreed to reimburse the Arrangers for certain of their expenses properly incurred in connection with the
establishment of the Programme and any future update of the Programme and the Dealers for certain of their
activities in connection with the Programme.
In connection with the issue of any Tranche of the Notes, the Dealer(s) (if any) named as the stabilising
manager(s) (the “Stabilising Manager(s)”) (or persons acting on behalf of any Stabilising Manager(s)) in the
relevant Pricing Supplement may, to the extent permitted by applicable laws and rules, over-allot the Notes or
effect transactions with a view to supporting the market price of the Notes at a level higher than that which might
otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or persons acting on behalf
of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the
date on which adequate public disclosure of the terms of the offer of the relevant Tranche of the Notes is made
and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date
of the relevant Series of the Notes and 60 days after the date of the allotment of the relevant Tranche of the Notes.
The Issuer and the Guarantor have agreed to indemnify the Dealers against certain liabilities in connection with
the offer and sale of the Notes. The Dealer Agreement entitles the Dealers to terminate any agreement that they
make to subscribe Notes in certain circumstances prior to payment for such Notes being made to the Issuer.
The Dealers and their affiliates are full service financial institutions engaged in various activities which may
include securities trading, commercial and investment banking, financial advice, investment management,
principal investment, hedging, financing and brokerage activities. In the ordinary course of their various business
activities, the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt
and equity securities (or related derivative securities) and financial instruments (including bank loans) for their
own account and for the accounts of their customers and may at any time hold long and short positions in such
securities and instruments.
Furthermore, it is possible that a significant proportion of the Notes may be initially allocated to, and
subsequently held by, a limited number of investors. If this is the case, the trading price and liquidity of trading
in the Notes may be constrained. The Issuer, the Guarantor and the Dealers are under no obligation to disclose
the extent of the distribution of the Notes amongst individual investors, otherwise than in accordance with any
applicable legal or regulatory requirements.
The Dealers and certain of their affiliates may have performed certain investment banking and advisory services
for the Issuer the Guarantor and/or their respective affiliates from time to time for which they have received
customary fees and expenses and may, from time to time, engage in transactions with and perform services for
the Issuer, the Guarantor and/or their respective affiliates in the ordinary course of their business. In connection
with each Tranche of Notes issued under the Programme, the Dealers or certain of their affiliates may purchase
Notes and be allocated Notes for asset management and/or proprietary purposes but not with a view to
distribution. Further, the Dealers or their respective affiliates may purchase Notes for its or their own account
and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default
swaps relating to such Notes and/or other securities of the Issuer, the Guarantor or their respective subsidiaries
or affiliates at the same time as the offer and sale of each Tranche of Notes or in secondary market transactions.
Such transactions would be carried out as bilateral trades with selected counterparties and separately from any
existing sale or resale of the Tranche of Notes to which a particular Pricing Supplement relates (notwithstanding
that such selected counterparties may also be purchasers of such Tranche of Notes).
Notice to capital market intermediaries and prospective investors pursuant to paragraph 21 of the Hong
Kong SFC Code of Conduct – Important Notice to CMIs (including private banks): This notice to CMIs
(including private banks) is a summary of certain obligations the SFC Code imposes on CMIs, which require the
attention and cooperation of other CMIs (including private banks). Certain CMIs may also be acting as OCs for
the relevant CMI Offering and are subject to additional requirements under the SFC Code. The application of
these obligations will depend on the role(s) undertaken by the relevant Dealer(s) in respect of each CMI Offering.
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Prospective investors who are the directors, employees or major shareholders of the Issuer, the Guarantor, a CMI
or its group companies would be considered under the SFC Code as having an Association with the Issuer, the
Guarantor, the CMI or the relevant group company. CMIs should specifically disclose whether their investor
clients have any Association when submitting orders for the relevant Notes. In addition, private banks should
take all reasonable steps to identify whether their investor clients may have any Associations with the Issuer, the
Guarantor or any CMI (including its group companies) and inform the relevant Dealers accordingly.
CMIs are informed that, unless otherwise notified, the marketing and investor targeting strategy for the relevant
CMI Offering includes institutional investors, sovereign wealth funds, pension funds, hedge funds, family offices
and high net worth individuals, in each case, subject to the selling restrictions and any MiFID II product
governance language or any UK MiFIR product governance language set out elsewhere in this Offering Circular
and/or the applicable Pricing Supplement.
CMIs should ensure that orders placed are bona fide, are not inflated and do not constitute duplicated orders (i.e.
two or more corresponding or identical orders placed via two or more CMIs). CMIs should enquire with their
investor clients regarding any orders which appear unusual or irregular. CMIs should disclose the identities of
all investors when submitting orders for the relevant Notes (except for omnibus orders where underlying investor
information may need to be provided to any OCs when submitting orders). Failure to provide underlying investor
information for omnibus orders, where required to do so, may result in that order being rejected. CMIs should
not place “X-orders” into the order book.
CMIs should segregate and clearly identify their own proprietary orders (and those of their group companies,
including private banks as the case may be) in the order book and book messages.
CMIs (including private banks) should not offer any rebates to prospective investors or pass on any rebates
provided by the Issuer, the Guarantor. In addition, CMIs (including private banks) should not enter into
arrangements which may result in prospective investors paying different prices for the relevant Notes. CMIs are
informed that a private bank rebate may be payable as stated above and in the applicable Pricing Supplement,
or otherwise notified to prospective investors.
The SFC Code requires that a CMI disclose complete and accurate information in a timely manner on the status
of the order book and other relevant information it receives to targeted investors for them to make an informed
decision. In order to do this, those Dealers in control of the order book should consider disclosing order book
updates to all CMIs.
When placing an order for the relevant Notes, private banks should disclose, at the same time, if such order is
placed other than on a “principal” basis (whereby it is deploying its own balance sheet for onward selling to
investors). Private banks who do not provide such disclosure are hereby deemed to be placing their order on such
a “principal” basis. Otherwise, such order may be considered to be an omnibus order pursuant to the SFC Code.
Private banks should be aware that placing an order on a “principal” basis may require the relevant affiliated
Dealer(s) (if any) to categorise it as a proprietary order and apply the “proprietary orders” requirements of the
SFC Code to such order and will result in that private bank not being entitled to, and not being paid, any rebate.
In relation to omnibus orders, when submitting such orders, CMIs (including private banks) that are subject to
the SFC Code should disclose underlying investor information in respect of each order constituting the relevant
omnibus order (failure to provide such information may result in that order being rejected). Underlying investor
information in relation to omnibus orders should consist of:
The name of each underlying investor;
A unique identification number for each investor;
Whether an underlying investor has any “Associations” (as used in the SFC Code);
Whether any underlying investor order is a “Proprietary Order” (as used in the SFC Code);
Whether any underlying investor order is a duplicate order.
Underlying investor information in relation to omnibus order should be sent to the Dealers named in the relevant
Pricing Supplement.
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To the extent information being disclosed by CMIs and investors is personal and/or confidential in nature, CMIs
(including private banks) agree and warrant: (A) to take appropriate steps to safeguard the transmission of such
information to any OCs; and (B) that they have obtained the necessary consents from the underlying investors
to disclose such information to any OCs. By submitting an order and providing such information to any OCs,
each CMI (including private banks) further warrants that they and the underlying investors have understood and
consented to the collection, disclosure, use and transfer of such information by any OCs and/or any other third
parties as may be required by the SFC Code, including to the Issuer, the Guarantor, relevant regulators and/or
any other third parties as may be required by the SFC Code, for the purpose of complying with the SFC Code,
during the bookbuilding process for the relevant CMI Offering. CMIs that receive such underlying investor
information are reminded that such information should be used only for submitting orders in the relevant CMI
Offering. The relevant Dealers may be asked to demonstrate compliance with their obligations under the SFC
Code, and may request other CMIs (including private banks) to provide evidence showing compliance with the
obligations above (in particular, that the necessary consents have been obtained). In such event, other CMIs
(including private banks) are required to provide the relevant Dealer with such evidence within the timeline
requested.
SELLING RESTRICTIONS
General
Each Dealer has agreed, and each further Dealer appointed under the Programme will be required to agree, that
it will (to the best of its knowledge and belief) comply in all material respect with all applicable securities laws,
regulations and directives in force in each jurisdiction in which it purchases, offers, sells or delivers Notes or
possesses or distributes the Offering Circular, any other offering or publicity material or any Pricing Supplement.
None of the Issuer, the Guarantor, the Trustee or any of the Dealers represent that Notes may at any time lawfully
be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to
any exemption available thereunder, or assumes any responsibility for facilitating such sale. With regard to each
Tranche, the relevant Dealer(s) will be required to comply with any additional restrictions agreed between the
Issuer and the relevant Dealer(s) and set out in the applicable Pricing Supplement.
If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Dealers or any affiliate
of the Dealers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that
Dealer or its affiliate on behalf of the Issuer in such jurisdiction.
United States
In respect of Notes offered or sold in reliance on Category 2 as specified in the applicable Pricing Supplement,
the Notes and the relevant Guarantee have not been and will not be registered under the Securities Act, and may
not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S or pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. The Notes are being offered and sold outside the United States to non-U.S.
persons in reliance on Regulation S. Each Dealer has represented and agreed, and each further Dealer appointed
under the Programme will be required to represent and agree, that it has not offered or sold or, in the case of
Bearer Notes, delivered, any Notes, and will not offer or sell or, in the case of Bearer Notes, deliver, any Notes
(i) as part of their distribution at any time and (ii) otherwise until 40 days after the completion of the distribution
of all Notes of the Tranche of which such Notes are a part, as determined and certified as provided below, within
the United States or to, or for the account or benefit of, U.S. persons. Each Dealer who has subscribed for Notes
of a Tranche (or in the case of a sale of a Tranche of Notes issued to or through more than one Dealer, each of
such Dealers as to the Notes of such Tranche purchased by or through it or, in the case of a syndicated issue,
the relevant lead manager) shall determine and certify to the Issuing and Paying Agent the completion of the
distribution of the Notes of such Tranche. Each Dealer has also agreed, and each further Dealer appointed under
the Programme will be required to agree, that, at or prior to confirmation of sale of Notes, it will have sent to
each distributor, Dealer or person receiving a selling concession, fee or other remuneration that purchases Notes
from it during the distribution compliance period a confirmation or notice setting out the restrictions on offers
and sales of the Notes within the United States or, to, or for the account or benefit of U.S. persons.
Terms used in the above provision have the meanings given to them by Regulation S.
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In addition, until 40 days after the commencement of the offering of any identifiable tranche of such Notes, an
offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may
violate the registration requirements of the Securities Act.
Bearer Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the
United States or its possessions or to a United States person, except in certain transactions permitted by
U.S. Treasury regulations. Terms used in this paragraph have the meaning given to them by the U.S.
Internal Revenue Code and regulations thereunder.
This Offering Circular has been prepared by the Issuer for use in connection with the offer and sale of the Notes
outside the United States. The Issuer and the Dealers reserve the right to reject any offer to purchase the Notes,
in whole or in part, for any reason. This Offering Circular does not constitute an offer to any person in the United
States. Distribution of this Offering Circular by any non-U.S. person outside the United States to any U.S. person
or to any other person within the United States, is unauthorised and any disclosure without the prior written
consent of the Issuer of any of its contents to any such U.S. person or other person within the United States, is
prohibited.
European Economic Area
Prohibition of Sales to European Economic Area Retail Investors
Unless the Pricing Supplement in respect of any Notes specifies “Prohibition of Sales to EEA Retail Investors”
as “Not Applicable”, each Dealer has represented and agreed, and each further Dealer appointed under the
Programme will be required to represent and agree, that it has not offered, sold or otherwise made available and
will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by
this Offering Circular as completed by the Pricing Supplement in relation thereto to any retail investor in the
European Economic Area. For the purposes of this provision:
(a) the expression “retail investor” means a person who is one (or more) of the following:
(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID
II”); or
(ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution
Directive”), where that customer would not qualify as a professional client as defined in point (10)
of Article 4(1) of MiFID II; or
(iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended, the “Prospectus
Regulation”); and
(b) the expression “offer” includes the communication in any form and by any means of sufficient information
on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or
subscribe for the Notes.
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Prospectus Regulation Public Offer Selling Restriction
If the Pricing Supplement in respect of any Notes specifies “Prohibition of Sales to EEA Retail Investors” as “Not
Applicable”, in relation to each member state of the European Economic Area (each, a “Relevant State”), each
Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to
represent and agree, that it has not made and will not make an offer of Notes which are the subject of the offering
contemplated by this Offering Circular as completed by the Pricing Supplement in relation thereto to the public
in that Relevant State except that it may make an offer of such Notes to the public in that Relevant State:
(a) if the Pricing Supplement in relation to the Notes specifies that an offer of those Notes may be made other
than pursuant to Article 1(4) of the Prospectus Regulation in that Relevant State (a “Non-exempt Offer”),
following the date of publication of a prospectus in relation to such Notes which has been approved by the
competent authority in that Relevant State or, where appropriate, approved in another Relevant State and
notified to the competent authority in that Relevant State, provided that any such prospectus has
subsequently been completed by the Pricing Supplement contemplating such Non-exempt Offer, in
accordance with the Prospectus Regulation, in the period beginning and ending on the dates specified in such
prospectus or Pricing Supplement, as applicable and the Issuer has consented in writing to its use for the
purpose of that Non-exempt Offer;
(b) at any time to any legal entity which is a qualified investor as defined in the Prospectus Regulation;
(c) at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the
Prospectus Regulation), subject to obtaining the prior consent of the relevant Dealer or Dealers nominated
by the Issuer for any such offer; or
(d) at any time in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of Notes referred to in (b) to (d) above shall require the Issuer or any Dealer to
publish a prospectus pursuant to Article 3 of the Prospectus Regulation, or supplement a prospectus pursuant to
Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression “an offer of Notes to the public” in relation to any Notes in
any Relevant State means the communication in any form and by any means of sufficient information on the
terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for
the Notes and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129, as amended.
United Kingdom
Prohibition of Sales to UK Retail Investors
Unless the Pricing Supplement in respect of any Notes specifies “Prohibition of Sales to UK Retail Investors”
as “Not Applicable”, each Dealer has represented and agreed, and each further Dealer appointed under the
Programme will be required to represent and agree, that it has not offered, sold or otherwise made available and
will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by
this Offering Circular as completed by the Pricing Supplement in relation thereto to any retail investor in the
United Kingdom. For the purposes of this provision:
(a) the expression “retail investor” means a person who is one (or more) of the following:
(i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part
of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or
(ii) a customer within the meaning of the provisions of the FSMA and any rules or regulations made under
the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a
professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms
part of domestic law by virtue of the EUWA; or
(iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of
domestic law by virtue of the EUWA; and
(b) the expression “offer” includes the communication in any form and by any means of sufficient information
on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or
subscribe for the Notes.
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If the Pricing Supplement in respect of any Notes specifies “Prohibition of Sales to UK Retail Investors” as “Not
Applicable”, each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that it has not made and will not make an offer of Notes which are the
subject of the offering contemplated by this Offering Circular as completed by the Pricing Supplement in relation
thereto to the public in the United Kingdom except that it may make an offer of such Notes to the public in the
United Kingdom:
(a) if the Pricing Supplement in relation to the Notes specify that an offer of those Notes may be made other
than pursuant to section 86 of the FSMA (a “Public Offer”), following the date of publication of a prospectus
in relation to such Notes which either (i) has been approved by the Financial Conduct Authority, or (ii) is
to be treated as if it had been approved by the Financial Conduct Authority in accordance with the
transitional provision in Regulation 74 of the Prospectus (Amendment etc.) (EU Exit) Regulations 2019,
provided that any such prospectus has subsequently been completed by the Pricing Supplement
contemplating such Public Offer, in the period beginning and ending on the dates specified in such
prospectus or the Pricing Supplement, as applicable, and the Issuer has consented in writing to its use for
the purpose of that Public Offer;
(b) at any time to any legal entity which is a qualified investor as defined in Article 2 of Regulation (EU)
2017/1129 as it forms part of domestic law by virtue of the EUWA;
(c) at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in Article
2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA) in the United
Kingdom subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for
any such offer; or
(d) at any time in any other circumstances falling within section 86 of the FSMA,
provided that no such offer of Notes referred to in (b) to (d) above shall require the Issuer or any Dealer to
publish a prospectus pursuant to section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of
Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA.
For the purposes of this provision, the expression “an offer of Notes to the public” in relation to any Notes
means the communication in any form and by any means of sufficient information on the terms of the offer and
the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes and the
expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by
virtue of the EUWA.
Other regulatory restrictions
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required
to represent and agree, that:
(a) in relation to any Notes which have a maturity of less than one year, (i) it is a person whose ordinary
activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for
the purposes of its business and (ii) it has not offered or sold and will not offer or sell any Notes other than
to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect
will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their
businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the
FSMA by the Issuer;
(b) it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of Section
21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which
Section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and
(c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done
by it in relation to any Notes in, from or otherwise involving the United Kingdom.
179
Hong Kong
In relation to each Tranche of Notes issued by the Issuer, each Dealer has represented and agreed, and each
further Dealer appointed under the Programme will be required to represent and agree, that:
(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes
except for Notes which are a “structured product” as defined in the Securities and Futures Ordinance (Cap.
571) of Hong Kong (the “SFO”) other than (i) to “professional investors” as defined in the SFO and any rules
made under the SFO; or (ii) in other circumstances which do not result in the document being a “prospectus”
as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong
(the “C(WUMP)O”) or which do not constitute an offer to the public within the meaning of the C(WUMP)O;
and
(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession
for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document
relating to any Notes, which is directed at, or the contents of which are likely to be accessed or read by, the
public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with
respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to
“professional investors” as defined in the SFO and any rules made under the SFO.
Singapore
Each Dealer has acknowledged, and each further Dealer appointed under the Programme will be required to
acknowledge, that this Offering Circular has not been registered as a prospectus with the Monetary Authority of
Singapore. Accordingly, each Dealer has represented and agreed, and each further Dealer appointed under the
Programme will be required to represent and agree, that it has not offered or sold any Notes or caused the Notes
to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause
the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or
distributed, nor will it circulate or distribute, this Offering Circular or any other document or material in
connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or
indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the
Securities and Futures Act 2001 of Singapore, as modified or amended from time to time (the “SFA”)) pursuant
to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the “SFA”) pursuant to
Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the
conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
Where Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,
securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that
corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred
within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under
Section 275 of the SFA except:
(1) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in
Section 275(1A) or Section 276(4)(c)(ii) of the SFA;
(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law;
180
(4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and
Securities-based Derivatives Contracts) Regulations 2018.
Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan
(Act No. 25 of 1948, as amended, the “Financial Instruments and Exchange Act”). Accordingly, each Dealer
has represented and agreed, and each further Dealer appointed under the Programme will be required to represent
and agree, that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell
any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person
resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for
re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except
pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial
Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan.
PRC
Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will
be required to represent, warrant and agree, that the Notes are not being offered or sold and may not be offered
or sold, directly or indirectly, in the PRC (for such purposes, not including Hong Kong, Macau or Taiwan), except
as permitted by applicable laws of the PRC.
British Virgin Islands
This Offering Circular does not constitute, and will not be, an offering of the Notes to any person in the British
Virgin Islands.
Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will
be required to represent, warrant and agree, that no invitation has been or will be made directly or indirectly to
the public in the British Virgin Islands or to any person in the British Virgin Islands to subscribe for or purchase
any of the Notes and the Notes are not being offered or sold and may not be offered or sold, directly or indirectly,
in the British Virgin Islands, except as otherwise permitted by the British Virgin Islands law.
Macau
Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will
be required to represent, warrant and agree, that the Notes have not been and will not be promoted, distributed,
sold or delivered in Macau, or any document relating to the Notes be distributed or circulated in Macau, except
under the terms of and in compliance with the Macau Financial System Act and any other laws in Macau that
may apply to the offer and sale of the Notes in Macau. The Notes have not been and will not be registered or
otherwise authorised for public offer under the Financial System Act of Macau, thus may not be offered or sold
in Macau, unless such offer is made by Macau licensed entities according to the Macau Financial System Act and
upon their communication to the Macau Monetary Authority, in observation of the guidelines and
recommendations issued by the Macau local regulatory authority from time to time.
181
GENERAL INFORMATION
AUTHORISATIONS
Each of the Issuer and the Guarantor has obtained all necessary consents, approvals and authorisations in
connection with the establishment of the Programme. The establishment of the Programme was authorised by
(1) the resolutions of the board of directors of the Issuer passed on 30 March 2023, (2) a resolution of the
shareholders of the Guarantor dated 21 June 2022 and (3) a resolution of the board of directors of the Guarantor
dated 29 March 2022.
Prior to issuing any Tranche of Notes under the Programme, the Issuer and the Guarantor will have obtained all
necessary consents, approvals and authorisations in connection with the issue of such Tranche of Notes, the
giving of the relevant Guarantee and the performance of their obligations thereunder. The Guarantor will also
make requisite CSRC filing (as described in “PRC Regulations”) following the passing of the relevant resolutions
for giving any Guarantee relating to the Notes under the Programme.
With respect to each Tranche of the Notes with a maturity of more than one year (where the NDRC
Administrative Measures are applicable), an Enterprise Foreign Debt Pre-Issuance Registration Certificate
evidencing the registration of the issue of such Tranche with the NDRC will be obtained prior to the relevant
Issue Date; and the Guarantor will undertake to, within the relevant prescribed timeframes after the Issue Date,
to file or cause to be filed with the NDRC the relevant NDRC Filings in accordance with the Terms and
Conditions of the Notes.
In addition, with respect to the Guarantee relating to each Tranche of Notes, the Guarantor will undertake to,
within the prescribed timeframe after the execution of the relevant Deed of Guarantee, file or cause to be filed
with SAFE the Cross-Border Security Registration in accordance with the Terms and Conditions of the Notes.
LITIGATION
None of the Issuer, the Guarantor or any other member of the Group is involved in any litigation or arbitration
proceedings that the Issuer or the Guarantor believes are material in the context of issue of the Notes and the
giving of the Guarantee, and so far as the Issuer and the Guarantor are aware, no such proceedings are pending
or threatened.
NO MATERIAL ADVERSE CHANGE
Save as disclosed in this Offering Circular, there has been no material adverse change in the financial condition,
business or general affairs of the Issuer, the Guarantor or the Group since 31 December 2022.
DOCUMENTS AVAILABLE
For so long as the Notes may be issued pursuant to this Offering Circular, copies of the following documents will
be available (upon written request and proof of holding and identity to the satisfaction of the Trustee), at all
reasonable times during usual business hours (being between 9:00 a.m. and 3:00 p.m., Hong Kong time) on any
weekday (Saturdays, Sundays and public holidays excepted), for inspection at the principal office of the Trustee,
being at the date of this Offering Circular, at 20th Floor, Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun
Tong, Kowloon, Hong Kong:
(i) the Trust Deed (which includes the form of the Global Notes, the Global Certificates, the Notes in definitive
form, the Coupons, the Receipts and the Talons);
(ii) the Agency Agreement;
(iii) each Deed of Guarantee;
(iv) each Pricing Supplement (save that a Pricing Supplement related to an unlisted Series of Notes will only be
available for inspection by a holder of any such Notes and such holder must produce evidence satisfactory
to the Trustee as to its holding of Notes and identity);
182
(v) a copy of this Offering Circular together with any supplement to this Offering Circular and any other
documents incorporated herein or therein referenced; and
(vi) the Procedures Memorandum.
CLEARING OF THE NOTES
The Notes have been accepted for clearance through the Euroclear and Clearstream systems. The relevant ISIN
and the Common Code will be specified in the applicable Pricing Supplement. The Issuer may also apply to have
Notes accepted for clearance through the CMU. The relevant CMU instrument number will be set out in the
relevant Pricing Supplement. If the Notes are to clear through an additional or alternative clearing system the
appropriate information will be set out in the relevant Pricing Supplement.
FINANCIAL STATEMENTS
The Guarantor’s consolidated financial statements as at and for the year ended 31 December 2021 and 2022,
which are included elsewhere in this Offering Circular, have been audited by PwC.
LISTING OF NOTES
Application has been made to the Hong Kong Stock Exchange for the listing of the Programme under which
Notes may be issued by way of debt issues to Professional Investors only within the 12-month period after the
date of this Offering Circular on the Hong Kong Stock Exchange.
The issue price of Notes listed on the Hong Kong Stock Exchange will be expressed as a percentage of their
principal amount. It is expected that dealings will, if permission is granted to deal in and for the listing of such
Notes, commence on or about the next business day following the date of issue of the relevant Notes. Admission
to the Hong Kong Stock Exchange and quotation of any Notes on the Hong Kong Stock Exchange is not to be
taken as an indication of the merits of the Programme, the Notes, the Guarantee, the Issuer, the Guarantor or the
Group. The Hong Kong Stock Exchange assumes no responsibility for the correctness of any of the statements
made or opinions or reports contained herein.
TEFRA D LEGEND
Notes issued pursuant to TEFRA D (other than temporary Global Notes) and any Coupons, Receipts and Talons
appertaining thereto will bear the following legend: “Any United States person who holds this obligation will be
subject to limitations under the United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code”.
183
INDEX TO FINANCIAL STATEMENTS
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE GUARANTOR AS AT AND
FOR THE YEAR ENDED 31 DECEMBER 2021
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statement of Profit or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Consolidated Statement of Total Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-16
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-18
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE GUARANTOR AS AT AND
FOR THE YEAR ENDED 31 DECEMBER 2022
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-207
Consolidated Statement of Profit or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-216
Consolidated Statement of Total Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-217
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-218
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-221
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-223
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-227
F-1
272 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of
Haitong Securities Co., Ltd.
(Incorporated in the People’s Republic of China with limited liability)
OPINION
What we have audited
The consolidated financial statements of Haitong Securities Co., Ltd. (the “Company”) and its subsidiaries
(the “Group”), which are set out on pages 281 to 476, comprise:
the consolidated statement of financial position as at 31 December 2021;
the consolidated statement of profit or loss for the year then ended;
the consolidated statement of total comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2021, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards
(“IFRSs”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong
Companies Ordinance.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’
Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical
responsibilities in accordance with the IESBA Code.
F-2
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 273
INDEPENDENT AUDITOR’S REPORT
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the consolidated financial statements of the current period. These matters were addressed in the context
of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key audit matters identified in our audit are summarised as follows:
Provision of expected credit loss for advances to customers on margin financing, financial assets held
under resale agreements, finance lease receivables and receivables arising from sale and leaseback
arrangements
Consolidation of structured entities
Valuation of financial assets at fair value through profit or loss and debt instruments at fair value
through other comprehensive income classified as Level 3 Financial Instruments
Key Audit Matter How our audit addressed the Key Audit Matter
(1) Provision of expected credit loss (“ECL”) We obtained an understanding of Management’s
for advances to customers on margin assessment process of ECL for advances to customers
financing, financial assets held under resale on margin financing, financial assets held under resale
agreements, finance lease receivables and agreements, finance lease receivables and receivables
receivables arising from sale and leaseback arising from sale and leaseback arrangements. We
arrangements: assessed the inherent risk of material misstatement
by considering the degree of estimation uncertainty
Refer to Note 26 & 27 & 32 & 40 to the consolidated and other inherent risk factors such as complexity,
financial statements subjectivity and sensitivity to potential material
misstatement caused by management bias or fraud
As at 31 December 2021, advances to customers on in the estimation.
margin financing, financial assets held under resale
agreements, finance lease receivables and receivables We evaluated and tested the Group’s internal controls
arising from sale and leaseback arrangements are relating to the measurement of ECL for the aforesaid
RMB76,937 million, RMB41,553 million, RMB35,037 financial assets, which included:
million and RMB55,858 million respectively, with
credit impairment loss allowance of RMB1,714 million, (i) Governance over ECL models, including the
RMB1,792 million, RMB1,564 million, and RMB770 selection and approval of methodologies and
million provided accordingly. The credit impairment models; and the ongoing monitoring and fine
losses for the aforesaid financial assets recognized in tuning of such models;
the Group’s consolidated income statement for the
year ended 31 December 2021 is RMB2,646 million.
The credit loss allowances as at 31 December
2021 for the aforesaid financial assets represented
Management’s best estimates of the ECL in
accordance with International Financial Reporting
Standard 9: “Financial Instruments”.
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274 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
INDEPENDENT AUDITOR’S REPORT
Key Audit Matter How our audit addressed the Key Audit Matter
(1) Provision of expected credit loss (“ECL”) (ii) Review and approval of significant management
for advances to customers on margin judgements and assumptions, including the
financing, financial assets held under resale criteria for SICR, credit default and credit
agreements, finance lease receivables and impairment; and the use of economic indicators
receivables arising from sale and leaseback for forward-looking measurement, and relative
arrangements: (continued) weighting for forward-looking scenarios;
Management applied a three-stage impairment (iii) Internal controls over the completeness and
model to calculate the ECL for the aforesaid financial accuracy of key data inputs used by the
assets. For financial assets classified under Stages 1 models.
and 2, Management assessed credit loss allowances
using the risk parameter modelling approach that In addition, we also performed the following
incorporated key parameters, including exposure at procedures:
default and probability of default or loss rate after
taking into consideration forward looking factors. For (i) We examined the ECL modelling methodologies
credit-impaired financial assets classified under Stage and assessed their reasonableness. We also
3, Management assessed the credit loss allowance evaluated whether the underlying coding
by estimating the future cash flows after taking into for the models reflected the methodologies
consideration forward looking factors. established by Management;
Management assesses the credit allowances for the (ii) We examined on a sample basis, the quantity,
aforesaid financial assets at each reporting date. nature and fair value of the collateral under
The measurement model for ECL involves significant advances to customers on margin financing and
management judgements and assumptions, primarily financial assets held under resale agreements
including: with further reviews on the collateral ratio
and the backstop past due days defined by
(i) Selection of the appropriate models and Management; examined on a sample basis
parameters; finance lease receivables and receivables arising
from sale and leaseback arrangements, with
(ii) Determination of the criteria for significant further reviews on the credit analysis performed
increase in credit risk (“SICR”), credit defaults by Management based on the operating and
and credit impairment; financial information of the debtors, type
of collaterals or guarantors; evaluated the
(iii) Projection of macroeconomic variables for appropriateness of the determination of the
forward looking scenarios and probability criteria for the SICR, credit default and credit
weightings. impairment for these financial assets;
The Group has established governance processes and
controls over the measurement of ECL.
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HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 275
INDEPENDENT AUDITOR’S REPORT
Key Audit Matter How our audit addressed the Key Audit Matter
(1) Provision of expected credit loss (“ECL”) (iii) We examined major data inputs to the ECL
for advances to customers on margin models on a sample basis, including exposure
financing, financial assets held under resale at default and probability of default or loss rate
agreements, finance lease receivables and after taking into consideration forward looking
receivables arising from sale and leaseback factors. For forward-looking measurement,
arrangements: (continued) we used statistical methods to evaluate
Management’s selection of economic indicators
The Group applied significant management and their correlation analysis with credit risk
judgements in measuring the ECL and the amounts portfolios. We assessed the reasonableness
involved were significant to the Group’s financial of the predictive economic indicators and
statements. This led to this matter being identified performed sensitivity analysis of economic
as a key audit matter. indicators and weightings;
(iv) For credit-impaired assets under Stage 3,
we examined, on a sample basis, forecasted
future cash flows prepared by Management
based on financial information of borrowers
and guarantors, latest collateral valuations
and other available information together with
discount rates in supporting the computation
of credit impairment loss allowance.
Based on the procedures performed, the models, key
parameters, significant judgements and assumptions
adopted by Management in the provision of ECL
for these assets and the measurement results were
considered acceptable.
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276 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
INDEPENDENT AUDITOR’S REPORT
Key Audit Matter How our audit addressed the Key Audit Matter
(2) Consolidation of structured entities: Our procedures in relation to the assessment of the
consolidation scope of structured entities included:
Refer to Note 69 Interest in Consolidated Structured
Entitles to the consolidated financial statements We evaluated and tested the effectiveness of key
controls of Management related to the consolidation
The Group acted as asset manager for, or invested in, of structured entities;
a number of structured entities.
We reviewed, on a sample basis, the contracts from
Management made significant judgements when the Group’s asset management and investment
concluding on whether the Group controlled, and portfolio to assess the extent of power the Group
therefore should consolidate these structured entities. had over its structured entities; the Group’s exposure
or rights to variable returns from its involvement
Management has determined that the Group had with those structured entities; and the relationship
control of certain structured entities based on their between the Group’s power and returns with respect
assessment of the Group’s power over the entities, to the structured entities.
its exposure to variable returns from its involvement
with those entities and its ability to use its power We traced, on a sample basis, the data used by
to affect the amount of its returns from these Management in the quantitative assessment of
structured entities. The aggregated carrying value of the Group’s variable return exposures back to the
all consolidated structured entities directly held by applicable contracts and other supporting financial
the Group amounted to RMB33,786 million as at 31 information, and re-performed the mathematical
December 2021. computations to examine the accuracy of the Group’s
variable return exposures.
The significant judgements exercised by Management
in assessing whether the Group had control over the Based on the procedures performed above, the
structured entities and the amount of such structured judgements made by Management when concluding
entities on the consolidated statement of financial the structured entities for consolidation were
position of the Group resulted in this matter being considered acceptable.
identified as a key audit matter.
F-6
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 277
INDEPENDENT AUDITOR’S REPORT
Key Audit Matter How our audit addressed the Key Audit Matter
(3) Valuation of financial assets at fair value We obtained an understanding of Management’s
through profit or loss (“FVTPL”) and debt process of valuation of Level 3 Financial Instruments
instruments at fair value through other and assessed the inherent risk of material
comprehensive income (“debt instruments misstatement by considering the degree of estimation
at FVTOCI”) classified as Level 3 Financial uncertainty and other inherent risk factors such
Instruments: as complexity, subjectivity involved and sensitivity
to potential material misstatements caused by
Refer to Note 76 Financial Risk Management to the management bias or fraud in the estimation.
consolidated financial statements
We evaluated and tested the design and the operating
As at 31 December 2021, the Group’s FVTPL and effectiveness of the Group’s internal controls over the
debt instruments at FVTOCI classified as Level 3 use, data input and ongoing fine-tuning of valuation
financial instrument in the fair value hierarchy (“Level models and critical estimates for the valuation of
3 Financial Instruments”), were RMB30,656 million these Level 3 Financial Instruments.
and RMB1,287 million, respectively. The fair value
of these Level 3 Financial Instruments was measured We evaluated the appropriateness of the models used
using valuation techniques that involve significant by Management for the valuation of Level 3 Financial
inputs that were not based on observable market Instruments based on our knowledge of current
data. These unobservable inputs included liquidity industry practice.
discounts, risk adjusted discount rates, adjusted
volatility and market multipliers, etc. We also evaluated, on a sample basis, the
reasonableness of the significant assumptions
Valuation of the FVTPL and debt instruments at and the accuracy of the unobservable inputs used
FVTOCI classified as Level 3 Financial Instruments for measuring the fair value of Level 3 Financial
was identified as a key audit matter given the size Instruments with reference to relevant market data.
and the significant judgements required in the
use of valuation models, critical assumptions and We performed, on a sample basis, an independent
unobservable inputs in the valuation process of these valuation of the Level 3 Financial Instruments and
Level 3 Financial Instruments. compared our results with the Group’s valuation
results.
Based on the procedures performed above, the
valuation models and inputs used in the valuation of
Level 3 Financial Instruments by Management were
considered acceptable.
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278 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
INDEPENDENT AUDITOR’S REPORT
OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises all
of the information included in the annual report other than the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE
FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements
that give a true and fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not
assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
F-8
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 279
INDEPENDENT AUDITOR’S REPORT
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
F-9
280 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
INDEPENDENT AUDITOR’S REPORT
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Leung Kwok Wai, Jimmy.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 29 March 2022
F-10
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 281
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 31 December 2021
2021 2020
Notes RMB’000 RMB’000
Revenue
– Commission and fee income 6 18,762,734 17,387,414
– Interest income 7 15,625,976 13,975,952
– Finance lease income 7 3,336,406 3,932,863
– Investment income and gains (net) 8 10,678,856 11,076,986
48,403,972 46,373,215
Other income and gains 9 9,405,589 7,903,985
Total revenue, gains and other income 57,809,561 54,277,200
Commission and fee expenses 10 (3,770,637) (3,535,266)
Interest expenses 11 (12,341,619) (13,018,271)
Depreciation and amortisation 12 (1,569,341) (1,363,882)
Staff costs 13 (9,025,250) (7,656,682)
Impairment losses under expected credit loss
model 14 (3,351,674) (4,586,225)
Impairment losses on other assets 15 (499,168) (10,923)
Other expenses 16 (10,357,962) (8,891,658)
Total expenses (40,915,651) (39,062,907)
Share of results of associates and joint ventures 1,649,889 543,017
Profit before income tax 18,543,799 15,757,310
Income tax expense 17 (4,795,937) (3,720,081)
Profit for the year 13,747,862 12,037,229
Attributable to:
Shareholders of the Company 12,826,517 10,875,396
Non-controlling interests 921,345 1,161,833
13,747,862 12,037,229
Earnings per share (Expressed in RMB per share)
– Basic 18 0.98 0.90
– Diluted 18 0.98 0.90
F-11
282 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
For the year ended 31 December 2021
2021 2020
RMB’000 RMB’000
Profit for the year 13,747,862 12,037,229
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on defined benefit obligations 39,131 (340)
Fair value (losses)/gains on equity instruments measured at fair value
through other comprehensive income (446,507) 268,174
Income tax impact 108,150 (71,531)
Subtotal (299,226) 196,303
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (739,071) (652,140)
Fair value gains/(losses) on hedging instrument designated in
cash flow hedges 94,909 (74,696)
Fair value gains/(losses) on hedges of net investments in foreign
operations 243,987 (293,331)
Fair value gains/(losses) on debt instruments measured at fair value
through other comprehensive income
– Net fair value changes during the year 270,696 (183,103)
– Reclassification adjustment to profit or loss on disposal 82,732 (51,587)
– Reclassification adjustment to profit or loss for expected credit loss 83,512 259,494
– Income tax relating to components of other comprehensive income (86,644) (4,392)
Share of other comprehensive income of associates and joint ventures,
net of related income tax (2,193) (34,727)
Subtotal (52,072) (1,034,482)
Other comprehensive income for the year (net of tax) (351,298) (838,179)
Total comprehensive income for the year 13,396,564 11,199,050
Attributable to:
Shareholders of the Company 12,932,504 11,090,942
Non-controlling interests 464,060 108,108
13,396,564 11,199,050
Total comprehensive income for the period attributable to
shareholders of the company arises from:
Continuing operations 13,396,313 11,226,584
Discontinued operations 251 (27,534)
13,396,564 11,199,050
F-12
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 283
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
31 December 31 December
Notes 2021 2020
RMB’000 RMB’000
Non-current assets
Property and equipment 19 15,088,876 15,109,289
Right-of-use assets 20 1,778,639 1,811,328
Investment properties 21 57,595 111,592
Goodwill 22 3,365,313 3,884,910
Other intangible assets 23 531,391 551,964
Investments accounted for using equity method 25 6,454,420 4,428,307
Finance lease receivables 26 11,270,189 20,751,276
Receivables arising from sale and leaseback arrangements 27 31,521,846 20,132,302
Equity instruments at fair value through other comprehensive
income 28 10,246,871 16,239,187
Debt instruments at fair value through other comprehensive
income 29 33,050,889 11,873,648
Debt instruments measured at amortised cost 30 3,626,108 2,241,831
Financial assets at fair value through profit or loss 31 25,132,195 26,145,088
Financial assets held under resale agreements 32 575,403 2,195,793
Other loans and receivables 33 2,394,396 3,235,445
Loans and advances 34 4,119,086 2,775,492
Deferred tax assets 35 5,171,925 4,282,160
Deposits with exchanges 36 163,245 166,688
Restricted bank balances and cash 37 1,503,454 1,288,296
Other non-current assets 39 1,891,358 996,613
Total non-current assets 157,943,199 138,221,209
Current assets
Advances to customers on margin financing 40 75,223,404 73,067,592
Accounts receivable 41 11,372,016 8,410,000
Finance lease receivables 26 22,202,398 27,660,127
Receivables arising from sale and leaseback arrangements 27 23,566,177 15,082,174
Debt instruments at fair value through other comprehensive
income 29 4,002,056 1,234,515
Debt instruments measured at amortised cost 30 1,099,101 1,521,668
Financial assets at fair value through profit or loss 31 195,277,554 194,251,416
Derivative financial assets 42 1,084,731 1,837,912
Financial assets held under resale agreements 32 39,185,614 55,769,601
Other loans and receivables 33 12,544,269 16,884,562
Loans and advances 34 593,565 1,044,635
Other current assets 43 6,242,087 3,446,643
Placements to banks and other financial institutions 44 352,928 22,619
Deposits with exchanges 36 17,491,923 17,208,163
Clearing settlement funds 45 16,765,418 11,852,301
Deposits with central banks 46 3,304,209 3,716,130
Deposits with other banks 46 226,337 258,664
Bank balances and cash 37 156,448,163 122,583,420
Total current assets 586,981,950 555,852,142
Total assets 744,925,149 694,073,351
F-13
284 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
31 December 31 December
Notes 2021 2020
RMB’000 RMB’000
Current liabilities
Borrowings 47 48,402,335 59,132,650
Short-term financing bills payables 48 24,986,688 25,718,523
Bonds payable 49 52,513,925 36,233,688
Accounts payable to brokerage clients 50 123,202,200 108,167,568
Customer accounts 51 2,758,837 4,413,388
Contract liabilities 52 156,746 131,039
Other payables and accruals 53 28,635,826 21,187,155
Lease liabilities 20 307,759 352,544
Provisions 54 203,800 141,084
Tax liabilities 3,477,590 2,986,567
Financial liabilities at fair value through profit or loss 55 10,456,105 22,226,074
Derivative financial liabilities 42 1,548,316 2,672,279
Financial assets sold under repurchase agreements 56 91,911,952 60,563,433
Placements from banks and other financial institutions 57 12,723,438 12,059,685
Deposits from central banks 155,411 887,565
Deposits from other banks 58 72,787 63,104
Total current liabilities 401,513,715 356,936,346
Net current assets 185,468,235 198,915,796
Total assets less current liabilities 343,411,434 337,137,005
Non-current liabilities
Long-term payables 63 6,230,344 8,005,920
Deferred tax liabilities 35 1,320,651 698,134
Customer accounts 51 3,185,654 –
Long-term borrowings 47 30,751,726 33,597,907
Bonds payable 49 111,072,145 111,604,522
Deposits from central banks 2,150,202 –
Other payables and accruals 53 1,405,175 1,382,286
Financial liabilities at fair value through profit or loss 55 5,860,112 10,012,227
Lease liabilities 20 739,420 699,869
Placements from banks and other financial institutions 57 2,941,219 3,009,828
Total non-current liabilities 165,656,648 169,010,693
Total liabilities 567,170,363 525,947,039
F-14
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 285
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
31 December 31 December
Notes 2021 2020
RMB’000 RMB’000
Equity
Share capital 59 13,064,200 13,064,200
Capital reserve 74,913,916 74,888,284
Revaluation reserve 60 305,179 282,378
Translation reserve (962,857) (932,948)
General reserves 61 28,313,210 24,924,156
Retained earnings 61 47,504,316 41,222,398
Equity attributable to shareholders the company 163,137,964 153,448,468
Non-controlling interests 14,616,822 14,677,844
Total equity 177,754,786 168,126,312
Total equity and liabilities 744,925,149 694,073,351
The consolidated financial statements on pages 281 to 476 were approved and authorised for issue by the
Board of Directors on 29 March 2022 and signed on its behalf by:
Zhou Jie Li Jun Zhang Xinjun
Chairman of Board Executive Director and Chief Financial Officer
General Manager
F-15
286 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Attributable to shareholders of the Company
Capital Non-
Share Reserve Revaluation Translation General Retained controlling Total
capital (Note) reserves reserve reserve earnings Total interests equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 13,064,200 74,888,284 282,378 (932,948) 24,924,156 41,222,398 153,448,468 14,677,844 168,126,312
Profit for the year – – – – – 12,826,517 12,826,517 921,345 13,747,862
Other comprehensive income
for the year – – 135,896 (29,909) – – 105,987 (457,285) (351,298)
Total comprehensive income
for the year – – 135,896 (29,909) – 12,826,517 12,932,504 464,060 13,396,564
Other equity instruments
issued by a subsidiary
(Note 62) – – – – – – – 811,512 811,512
Appropriation to general reserve – – – – 3,389,054 (3,389,054) – – –
Cash dividend recognised as
distribution (Note 67) – – – – – (3,266,050) (3,266,050) – (3,266,050)
Distribution to non-controlling
interests and other equity
instruments holders – – – – – – – (729,896) (729,896)
Share-based payments of
a subsidiary – 9,356 – – – – 9,356 99,710 109,066
Repurchase of shares of
subsidiary – – – – – – – – –
Disposal of equity instruments
at fair value through other
comprehensive income – – (113,095) – – 113,095 – – –
Changes in non-controlling
interests – 16,276 – – – – 16,276 (705,169) (688,893)
Others – – – – – (2,590) (2,590) (1,239) (3,829)
As at 31 December 2021 13,064,200 74,913,916 305,179 (962,857) 28,313,210 47,504,316 163,137,964 14,616,822 177,754,786
F-16
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 287
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Attributable to shareholders of the Company
Capital Non-
Share Reserve Revaluation Translation General Retained controlling Total
capital (Note) reserves reserve reserve earnings Total interests equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 11,501,700 56,526,247 114,007 (1,002,905) 22,092,447 36,859,497 126,090,993 15,027,750 141,118,743
Profit for the year – – – – – 10,875,396 10,875,396 1,161,833 12,037,229
Other comprehensive income for
the year – – 145,589 69,957 – – 215,546 (1,053,725) (838,179)
Total comprehensive income
for the year – – 145,589 69,957 – 10,875,396 11,090,942 108,108 11,199,050
Shares issued by the parent
company 1,562,500 18,286,436 – – – – 19,848,936 – 19,848,936
Other equity instruments
issued by a subsidiary
(Note 62) – – – – – – – 286,500 286,500
Appropriation to general reserve – – – – 2,831,709 (2,831,709) – – –
Cash dividend recognised as
distribution (Note 67) – – – – – (3,657,976) (3,657,976) – (3,657,976)
Distribution to non-controlling
interests and other equity
instruments holders – 74,564 – – – – 74,564 (449,464) (374,900)
Share-based payments of
a subsidiary – 1,037 – – – – 1,037 41,459 42,496
Repurchase of shares of
subsidiary – – – – – – – (210,361) (210,361)
Disposal of equity instruments
at fair value through other
comprehensive income – – 22,782 – – (22,782) – – –
Changes in non-controlling
interests – – – – – – – (126,176) (126,176)
Others – – – – – (28) (28) 28 –
As at 31 December 2020 13,064,200 74,888,284 282,378 (932,948) 24,924,156 41,222,398 153,448,468 14,677,844 168,126,312
Note: Capital reserve of the Group represents primarily (i) the share premium arisen from the issuance of the Company’s
shares, and (ii) the difference between the considerations paid over the proportionate share of net assets attributable
to the acquisition of additional interests in subsidiaries.
F-17
288 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
2021 2020
RMB’000 RMB’000
OPERATING ACTIVITIES
Profit before income tax 18,543,799 15,757,310
Adjustments for
Interest expenses 12,341,619 13,018,271
Share of results of associates and joint ventures (1,649,889) (543,017)
Depreciation and amortisation 1,569,341 1,363,882
Impairment losses under expected credit loss model 3,351,674 4,586,225
Impairment losses of other assets 499,168 10,923
Share-based payment of a subsidiary 109,065 41,459
Losses on disposal of property and equipment and
other intangible assets 12,734 3,666
Foreign exchange gains, net (279,938) (211,406)
Interest income from debt instruments at fair value through
other comprehensive income (839,666) (466,824)
Interest income from debt instruments measured at amortised cost (64,274) (36,900)
Dividend income arising from equity instruments at fair value
through other comprehensive income (1,195,069) (42,927)
Net gains arising from debt instruments at fair value through
other comprehensive income (620,788) (14,485)
Net realised losses/(gains) arising from financial assets at
fair value through profit or loss 1,068,863 (191,259)
Fair value change of financial instruments at fair value
through profit or loss (290,515) (1,270,742)
Others – (38,131)
Operating cash flows before movements in working capital 32,556,124 31,966,045
F-18
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 289
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
2021 2020
RMB’000 RMB’000
Increase in finance lease receivables and receivables arising from sale
and leaseback arrangements (6,313,223) (7,663,393)
Decrease in financial assets at fair value through profit or loss
and derivative financial assets 3,397,337 4,567,179
Decrease/(Increase) in financial assets held under resale agreements 14,489,244 (1,344,558)
Decrease in other loans and receivables 4,660,945 3,928,030
Increase in loans and advances (797,145) (604,239)
Increase in advances to customers on margin financing (2,617,227) (21,246,715)
(Increase)/Decrease in accounts receivables and other current assets (5,818,500) 1,962,061
(Increase)/Decrease in placements to banks and other financial institutions (333,000) 64,490
Increase in deposits with exchanges (280,317) (6,618,751)
Decrease in deposit with central banks 8,881 17,867
Increase in restricted bank deposits (335,342) (718,575)
Increase in cash held on behalf of clients (17,775,373) (17,237,839)
Increase in accounts payable to brokerage clients and other payables
and accruals 20,873,033 23,316,400
Increase in customer accounts 1,531,103 1,539,751
Increase/(Decrease) in contract liabilities 25,707 (51,959)
Increase in provisions 64,429 83,268
(Decrease)/Increase in financial liabilities at fair value through
profit or loss and derivative financial liabilities (16,893,288) 2,315,850
Increase/(Decrease) in financial assets sold under repurchase agreements 31,348,519 (8,907,430)
Increase/(Decrease) in placements from banks and other financial
institutions 595,145 (5,553,001)
Increase in deposit from central banks 1,418,048 715,624
Increase in deposit from other banks 9,683 60,005
Cash from operations 59,814,783 590,110
Income taxes paid (3,635,454) (3,501,661)
Interest paid (3,431,920) (3,339,751)
Net cash inflow/(outflow) from operating activities 52,747,409 (6,251,302)
F-19
290 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
2021 2020
RMB’000 RMB’000
INVESTING ACTIVITIES
Dividends received from associates and other investments 334,540 196,746
Dividends received from equity instruments at fair value through other
comprehensive income 1,195,069 42,927
Interest from the debt instruments at fair value through other
comprehensive income and amortised cost 346,175 508,248
Purchases of property and equipment and other intangible assets (1,799,247) (8,094,165)
Acquisition of a subsidiary – (1,680,869)
Proceeds on disposal of property and equipment 455,196 18,557
Cash paid for investments accounted for using equity method (1,398,675) (419,750)
Proceeds from partial disposal of associates and joint ventures 685,719 605,400
Purchases of
Debt instruments at fair value through other comprehensive income (30,272,325) (9,522,434)
Financial assets at fair value through profit or loss (3,774,445) (5,727,804)
Equity instruments at fair value through other comprehensive income (4,794,583) (563,438)
Debt instruments measured at amortised cost (2,443,311) (2,493,058)
Proceeds from disposal of
Equity instruments at fair value through other comprehensive income 10,886,498 436,745
Debt instruments at fair value through other comprehensive income 5,457,106 7,276,001
Debt instruments measured at amortised cost 1,836,516 1,344,582
Financial assets at fair value through profit or loss 2,348,936 1,616,522
Net cash outflow from investing activities (20,936,831) (16,455,790)
F-20
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 291
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
2021 2020
RMB’000 RMB’000
FINANCING ACTIVITIES
Dividends paid (3,931,210) (4,057,229)
Proceeds from issuance of ordinary shares – 20,000,000
Proceeds from issuance of subsidiaries’ shares 31,298 37,794
Payments on capital returned to non-controlling shareholders – (88,370)
Borrowings raised 53,066,260 66,600,567
Interest paid for borrowings and bonds (8,360,887) (9,940,371)
Interest paid for perpetual notes (64,736) (50,211)
Issuance cost paid for short-term bonds, non-convertible bonds and others (268,863) (228,716)
Repayment of lease liabilities (506,791) (518,802)
Repayment of borrowings, short-term bonds, non-convertible bonds
and others (177,742,005) (214,257,670)
Proceeds from share issued upon exercise of share options of a subsidiary 2,506 –
Proceeds from non-convertible bonds and short-term financing
bills payables 126,612,630 161,612,817
Issuance cost paid – (159,830)
Purchase of shares held under the share award scheme – (210,361)
Net cash (outflow)/inflow from financing activities (11,161,798) 18,739,618
Net increase/(decrease) in cash and cash equivalents 20,648,780 (3,967,474)
Effect of exchange rate changes on cash and cash equivalents (250,989) 227,865
Cash and cash equivalents at the beginning of period 37,307,276 41,046,885
Cash and cash equivalents at the end of period (Note 38) 57,705,067 37,307,276
F-21
292 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
1. GENERAL INFORMATION OF THE GROUP
Haitong Securities Co., Ltd. (the “Company”) was transformed from Shanghai Haitong Securities
Company ( ), which was established in 1988, to a limited liability company upon the
authorisation by the People’s Bank of China in September 1994 and changed its name to
. In December 2001, the Company was further transformed to a joint-stock company upon the
approval from China Securities Regulatory Commission (the “CSRC”). In January 2002, the Company
changed its name from to Haitong Securities Co., Ltd. ( ). In
June 2007, the Company’s merger with former Shanghai Urban Agro-Business Co., Ltd. (
) was approved by the CSRC, and was listed on the Shanghai Stock Exchange in July
in the same year. After its listing, its name was changed to “Haitong Securities”. On 27 April 2012,
the Company issued H shares which were listed on the Main Board of The Stock Exchange of Hong
Kong Limited (the “Hong Kong Stock Exchange”).
The address of the Company’s registered office and the principal place of business is Haitong Securities
Building, No. 689 Guangdong Road, Shanghai, the People’s Republic of China (the “PRC”).
The Company and its subsidiaries (the “Group”) are principally engaged in securities brokerage;
proprietary securities activities; securities underwriting and sponsorship; securities investment advisory;
financial consultancy related to securities trading and investment activities; direct equity investments;
securities investment fund distribution; introducing brokerage business for futures companies; margin
financing and securities lending; agency sale of financial products; stock option market-making, the
consolidated financial statements are presented in Renminbi (“RMB”), which is also the functional
currency of the Company.
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS
For the purpose of preparing and presenting the consolidated financial statements, the Group has
applied the following new and amendments to International Financial Reporting Standards (“IFRSs”)
issued by the International Accounting Standards Board (“IASB”) which are relevant to the Group for
the first time in the current year:
2.1. New and amended standards adopted by the Group
The Group has adopted the new and amended standards from 1 January 2021 in their first
interim financial statements:
(a) Amendments to IFRS 16: COVID 19 – Related Rent Concessions (March 2021)
(b) Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark (IBOR)
Reform-Phase 2
F-22
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 293
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.1. New and amended standards adopted by the Group (Continued)
(a) Amendments to IFRS 16: COVID 19 – Related Rent Concessions (March 2021)
In May 2020, the IASB published an amendment to IFRS 16 that provided lessees (but not
lessors) with relief in the form of an optional practical expedient from assessing whether a
rent concession related to COVID-19 is a lease modification (the ‘May 2020 amendment’).
Lessees could elect to account for rent concessions in the same way as if they were not
lease modifications. In many cases, the practical expedient resulted in accounting for the
concession as a variable lease payment.
The practical expedient in the May 2020 amendment applied only to rent concessions
occurring as a direct consequence of the COVID-19 pandemic, and only if all of the
following conditions were met:
a. the change in lease payments resulted in revised consideration for the lease that was
substantially the same as, or less than, the consideration for the lease immediately
preceding the change;
b. any reduction in lease payments affected only payments due on or before 30 June
2021; and
c. there was no substantive change to other terms and conditions of the lease.
On 31 March 2021, in light of the ongoing pandemic, the IASB published an additional
amendment to extend the date from 30 June 2021 to 30 June 2022 (the ‘March 2021
amendment’).
(b) Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark
(IBOR) Reform-Phase 2
Amendments to IFRSs issued (Interest Rate Benchmark Reform Phase 2) represents the
second phase of the project on the effects of interest rate benchmark reform, addressing
issues affecting financial statements when changes are made to contractual cash flows
and hedging relationships as a result of reform.
Under these amendments, changes made to financial instruments measured at other
than fair value through profit or loss that are economically equivalent and required by
interest rate benchmark reform do not result in the derecognition or a change in the
carrying amount of the financial instrument, but instead require the effective interest rate
to be updated to reflect the change in the interest rate benchmark. In addition, hedge
accounting will not be discontinued solely because of the replacement of the interest rate
benchmark if the hedge meets other hedge accounting criteria.
F-23
294 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.1. New and amended standards adopted by the Group (Continued)
The following table shows the outstanding carrying amount of financial instruments subject to
interest rate benchmark reform, by main benchmark, as at 31 December 2021:
Hong Kong London
Interbank Interbank
Offered Rate Offered Rate
(“HIBOR”) (“LIBOR”)
RMB(’000) RMB(’000)
Financial assets
Financial assets at fair value through
profit or loss 722,170 –
Financial assets held under resale agreement 6,189 –
Other loans and receivables 1,141,306 317,339
Loans and advances – –
Accounts receivable – 258,349
Derivative financial assets – 12,417
Financial liabilities
Borrowings and bonds payable 20,252,098 10,467,209
Financial liabilities at fair value through
profit or loss – –
Derivative financial liabilities – 139,566
None of the above contracts has been transitioned to the relevant reform rates as at 31 December
2021.
There were no significant impacts from amendments above on the Group’s consolidated financial
statements.
F-24
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 295
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.2. Impact of standards issued but not yet applied by the Group
The Group has not adopted the following new and amended standards that have been issued
but are not yet effective.
Effective for annual periods
beginning on or after
(a) IFRS 17 Insurance Contracts 1 January 2023
(b) Amendments to Sale or Contribution The amendments were originally intended
IFRS 10 and of Assets between to be effective for annual periods
IAS 28 An Investor and Its beginning on or after 1 January 2016.
Associate or Joint The effective date has now been deferred.
Venture Early adoption of the amendments
continue to be permitted
(c) Amendments to Classification of 1 January 2023
IAS 1 liabilities
(d) Amendments to Business Combinations 1 January 2022
IFRS 3
(e) Amendments to Property, Plant and 1 January 2022
IAS 16 Equipment
(f) Amendments to Provisions, Contingent 1 January 2022
IAS 37 Liabilities and
Contingent Assets
(a) IFRS 17: Insurance Contracts
IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. It requires
a current measurement model where estimates are re-measured each reporting period.
Contracts are measured using the building blocks of: discounted probability-weighted cash
flows, an explicit risk adjustment, and a contractual service margin (“CSM”) representing
the unearned profit of the contract which is recognised as revenue over the coverage
period. The new rules will affect the financial statements and key performance indicators
of all entities that issue insurance contracts or investment contracts with discretionary
participation features. The Group anticipates that the adoption of this standard will not
have any impact on the Group’s consolidated financial statements.
(b) Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between An
Investor and Its Associate or Joint Venture
These amendments address an inconsistency between IFRS 10 and IAS 28 in the sale
and contribution of assets between an investor and its associate or joint venture. A full
gain or loss is recognised when a transaction involves a business. A partial gain or loss
is recognised when a transaction involves assets that do not constitute a business, even
if those assets are in a subsidiary. The Group anticipates that the adoption of these
amendments will not have a significant impact on the Group’s consolidated financial
statements.
F-25
296 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.2. Impact of standards issued but not yet applied by the Group (Continued)
(c) Amendments to IAS 1: Classification of liabilities
These narrow-scope amendments to IAS 1, ‘Presentation of financial statements’, clarify
that liabilities are classified as either current or non-current, depending on the rights
that exist at the end of the reporting period. Liabilities are classified as non-current
if the entity has a substantive right to defer settlement for at least 12 months at the
end of the reporting period. The entity should assess the existence of the right on the
reporting date, whether the right will be enforced is out of consideration. The right to
defer only exists if the entity complies with any relevant conditions at the reporting date.
A liability is classified as current if a condition is breached at or before the reporting date
and a waiver is obtained after the reporting date. A loan is classified as non-current if a
covenant is breached after the reporting date. The Group anticipates that the adoption of
the amendments will not have a significant impact on the Group’s consolidated financial
statements.
(d) Amendments to IFRS 3: Business Combinations
Amendments to IFRS 3: ‘Business combinations’ update a reference in IFRS 3 to
the Conceptual Framework for Financial Reporting without changing the accounting
requirements for business combinations. The Group anticipates that the adoption of the
amendments will not have a significant impact on the Group’s consolidated financial
statements.
(e) Amendments to IAS 16: Property, Plant and Equipment
Amendments to IAS 16, ‘Property, plant and equipment’ prohibit a company from
deducting from the cost of property, plant and equipment amounts received from selling
items produced while the company is preparing the asset for its intended use. Instead, a
company will recognise such sales proceeds and related cost in profit or loss. The Group
anticipates that the adoption of the amendments will not have a significant impact on
the Group’s consolidated financial statements.
(f) Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets
Amendments to IAS 37, ‘Provisions, contingent liabilities and contingent assets’ specify
which costs a company includes when assessing whether a contract will be loss-making.
The Group anticipates that the adoption of the amendments will not have a significant
impact on the Group’s consolidated financial statements.
F-26
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 297
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with IFRSs issued by the IASB.
In addition, the consolidated financial statements include applicable disclosures required by the Rules
Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“Listing Rules”) and
by the Hong Kong Companies Ordinance (“CO”).
The consolidated financial statements have been prepared on the historical cost basis except for financial
instruments that are measured at fair values at the end of each reporting period, as explained in the
accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is
directly observable or estimated using another valuation technique. In estimating the fair value of an
asset or a liability, the Group takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or liability at the
measurement date.
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is
determined on such a basis, except for share-based payment transactions that are within the scope of
IFRS 2 Share-based Payment, leasing transactions that are accounted for in accordance with IFRS 16,
and measurements that have some similarities to fair value but are not fair value, such as net realisable
value in IAS 2 Share-based Payment or value in use in IAS 36 Impairment of Assets.
For financial instruments, which are transacted at fair value and a valuation technique that unobservable
input is to be used to measure fair value in subsequent periods, the valuation technique is calibrated
so that at initial recognition the results of the valuation technique equals the transaction price.
F-27
298 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
(including structured entities) controlled by the Company and its subsidiaries. Control is achieved when
the Company:
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
When the Group has less than a majority of the voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities
of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing
whether or not the Group’s voting rights in an investee are sufficient to give it power, including:
the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of
the other vote holders;
potential voting rights held by the Group, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Group has, or does not have,
the current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings.
F-28
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 299
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Basis of consolidation (Continued)
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of profit or loss
and other comprehensive income from the date the Group gains control until the date when the Group
ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the shareholders of the
Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed
to the shareholders of the Company and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which
represent present ownership interests entitling their holders to a proportionate share of net assets of
the relevant subsidiaries upon liquidation.
Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant
components of equity and the non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and
the non-controlling interests according to the Group’s and the non-controlling interests’ proportionate
interest.
Any difference between the amount by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly in equity and attributed to shareholders
of the Company.
F-29
300 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Basis of consolidation (Continued)
Changes in the Group’s ownership interests in existing subsidiaries (Continued)
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and non-
controlling interests (if any) are derecognised. A gain or loss is recognised in profit or loss and is
calculated as the difference between (i) the aggregate of the fair value of the consideration received
and the fair value of any retained interest and (ii) the carrying amount of the assets (including goodwill),
and liabilities of the subsidiary attributable to shareholder of the company. All amounts previously
recognised in other comprehensive income in relation to that subsidiary are accounted for as if the
Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit
or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair
value of any investment retained in the former subsidiary at the date when control is lost is regarded
as the fair value on initial recognition for subsequent accounting under IFRS 9, when applicable, the
cost on initial recognition of an investment in an associate or a joint venture.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred
in a business combination is measured at fair value, which is calculated as the sum of the acquisition-
date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former
shareholders of the acquiree and the equity interests issued by the Group in exchange for control of
the acquiree. Acquisition related costs are generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at
their fair value, except that:
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at
the acquisition date (see the accounting policy below); and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-
current Assets Held for Sale and Discontinued Operations are measured in accordance with that
standard.
lease liabilities are recognised and measured at the present value of the remaining lease payments
(as defined in IFRS 16) as if the acquired leases were new leases at the acquisition date, except
for leases for which (a) the lease term ends within 12 months of the acquisition date; or (b) the
underlying asset is of low value. Right-of-use assets are recognised and measured at the same
amount as the relevant lease liabilities, adjusted to reflect favourable or unfavourable terms of
the lease when compared with market terms.
F-30
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 301
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Business combinations (Continued)
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net amounts of the identifiable assets acquired and the liabilities
assumed as at the acquisition date. If, after re-assessment, the net of the acquisition-date amounts of
the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred,
the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously
held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate
share of the relevant subsidiary’s net assets in the event of liquidation are initially measured at the non-
controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net
assets or at fair value. The choice of measurement basis is made on a transaction-by-transaction basis.
When the consideration transferred by the Group in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured
at its acquisition-date fair value and included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with the corresponding adjustments made against
goodwill. Measurement period adjustments are adjustments that arise from additional information
obtained during the “measurement period” (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition date.
The subsequent accounting for the contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement
is accounted for within equity. Contingent consideration that is classified as an asset or a liability is
remeasured at subsequent reporting dates of fair value, with the corresponding gain or loss being
recognised in profit or loss.
When a business combination is achieved in stages, the Group’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains
control), and the resulting gain or loss, if any, is recognised in profit or loss or other comprehensive
income, as appropriate. Amounts arising from interests in the acquiree prior to the acquisition date
that have previously been recognised in other comprehensive income and measured under IFRS 9 would
be accounted for on the same basis as would be required if the Group had disposed directly of the
previously held equity interest.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which
the accounting is incomplete. Those provisional amounts are adjusted retrospectively during the
measurement period (see above), and additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed at the acquisition date that, if known,
would have affected the amounts recognised at that date.
F-31
302 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition
of the business less any accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the cash-generating units (or
groups of cash-generating units) that is expected to benefit from the synergies of the combination,
which represent the lowest level at which the goodwill is monitored for internal management purposes
and not larger than an operating segment.
A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is
tested for impairment annually, or more frequently when there is indication that the unit may be
impaired. For goodwill arising from an acquisition in a reporting period, the cash-generating unit (or
group of cash-generating units) to which goodwill has been allocated is tested for impairment before
the end of that reporting period. If the recoverable amount is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other
assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit (or group
of cash-generating units).
On disposal of the relevant cash-generating unit, or any of the cash-generating unit within the group
of cash-generating units, the attributable amount of goodwill is included in the determination of
the amount of profit or loss on disposal. When the Group disposes of an operation within the cash-
generating unit (or a cash-generating unit within a group of cash-generating units), the amount of
goodwill disposed of is measured on the basis of the relative values of the operation (or the cash-
generating unit) disposed of and the portion of the cash-generating unit (or the group of cash-
generating units) retained.
The Group’s policy for goodwill arising on the acquisition of an associate and a joint venture is described
below.
Investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but is not control
or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
F-32
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 303
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Investments in associates and joint ventures (Continued)
The results and assets and liabilities of associates and joint ventures are incorporated in the consolidated
financial statements using the equity method of accounting. The financial statements of associates and
joint ventures used for equity accounting purposes are prepared using uniform accounting policies as
those of the Group for like transactions and events in similar circumstances. Under the equity method,
investment in an associate or a joint venture is initially recognised in the consolidated statement of
financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and
other comprehensive income of the associate or joint venture. Changes in net assets of the associate/
joint venture other than profit or loss and other comprehensive income are not accounted for unless
such changes resulted in changes in ownership interest held by the Group. When the Group’s share
of losses of an associate or joint venture exceeds the Group’s interest in that associate or joint venture
(which includes any long-term interests that, in substance, form part of the Group’s net investment in
the associate or join venture), the Group discontinues recognising its share of further losses. Additional
losses are recognised only to the extent that the Group has incurred legal or constructive obligations
or made payments on behalf of that associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the
date on which the investee becomes an associate or a joint venture. On acquisition of the investment in
an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the
net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which
is included within the carrying amount of the investment. Any excess of the Group’s share of the net
fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is
recognised immediately in profit or loss in the period in which the investment is acquired.
The Group assesses whether there is an objective evidence that the interest in an associate or a joint
venture may be impaired. When any objective evidence exists, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of assets
as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs
of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset,
including goodwill, that forms part of the carrying amount of the investment. Any reversal of that
impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of
the investment subsequently increases.
F-33
304 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Investments in associates and joint ventures (Continued)
When the Group ceases to have significant influence over an associate or joint control over a joint
venture, it is accounted as a disposal of the entire interest in the investee with a resulting gain or loss
being recognised in profit or loss. When the Group retains an interest in the former associate or joint
venture and the retained interest is a financial asset within the scope of IFRS 9, the Group measures
the retained interest at that date and the fair value is regarded as its fair value on initial recognition.
The difference between the carrying amount of the associate or joint venture, and the fair value of
any retained interest and any proceeds from disposing the relevant interest in the associate or joint
venture is included in the determination of the gain or loss on disposal of the associate or joint venture.
In addition, the Group accounts for all amounts previously recognised in other comprehensive income
in relation to that associate or joint venture on the same basis as would be required if that associate
or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss
previously recognised in other comprehensive income by that associate or joint venture would be
reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the
gain or loss from equity to profit or loss (as a reclassification adjustment) upon disposal/partial disposal
of the relevant associate or joint venture.
When the Group reduces its ownership interest in an associate or a joint venture but the Group
continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain
or loss that had previously been recognised in other comprehensive income relating to that reduction
in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the
related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Group, profits and losses
resulting from the transactions with the associate or joint venture are recognised in the Group’s
consolidated financial statements only to the extent of interests in the associate or joint venture that
are not related to the Group.
Revenue from contracts with customers
The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of
the goods or services underlying the particular performance obligation is transferred to the customer.
A performance obligation represents a good and service (or a bundle of goods or services) that is distinct
or a series of distinct goods or services that are substantially the same.
F-34
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 305
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Revenue from contracts with customers (Continued)
Control is transferred over time and revenue is recognised over time by reference to the progress
towards complete satisfaction of the relevant performance obligation if one of the following criteria
is met:
the customer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Group performs;
the Group’s performance creates and enhances an asset that the customer controls as the Group
performs; or
the Group’s performance does not create an asset with an alternative use to the Group and the
Group has an enforceable right to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct
good or service.
A contract asset represents the Group’s right to consideration in exchange for goods or services that
the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment
in accordance with IFRS 9. In contrast, a receivable represents the Group’s unconditional right to
consideration, i.e. only the passage of time is required before payment of that consideration is due.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for
which the Group has received consideration (or an amount of consideration is due) from the customer.
A contract asset and a contract liability relating to a contract are accounted for an presented on a net
basis.
Contract with multiple performance obligations (including allocation of transaction pricing)
For contracts that contain more than one performance obligations, the Group allocates the transaction
price to each performance obligation on a relative stand-alone selling price basis, except for the
allocation of discounts and variable consideration.
The stand-alone selling price of the distinct good or service underlying each performance obligation
is determined at contract inception. It represents the price at which the Group would sell a promised
good or service separately to a customer. If a stand-alone selling price is not directly observable, the
Group estimates it using appropriate techniques such that the transaction price ultimately allocated
to any performance obligation reflects the amount of consideration to which the Group expects to be
entitled in exchange for transferring the promised goods or services to the customer.
F-35
306 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Revenue from contracts with customers (Continued)
Over time revenue recognition: measurement of progress towards complete satisfaction of a
performance obligation
Output method
The progress towards complete satisfaction of a performance obligation is measured based on output
method, which is to recognise revenue on the basis of direct measurements of the value of the goods
or services transferred to the customer to date relative to the remaining goods or services promised
under the contract, that best depict the Group’s performance in transferring control of goods or services.
Variable consideration
For contracts that contain variable consideration, the Group estimates the amount of consideration
to which it will be entitled using either (a) the expected value method or (b) the most likely amount,
depending on which method better predicts the amount of consideration to which the Group will be
entitled.
The estimated amount of variable consideration is included in the transaction price only to the extent
that it is highly probable that such an inclusion will not result in a significant revenue reversal in the
future when the uncertainty associated with the variable consideration is subsequently resolved.
At the end of each reporting period, the Group updates the estimated transaction price (including
updating its assessment of whether an estimate of variable consideration is constrained) to represent
faithfully the circumstances present at the end of the reporting period and the changes in circumstances
during the reporting period.
Principal versus agent
When another party is involved in providing goods or services to a customer, the Group determines
whether the nature of its promise is a performance obligation to provide the specified goods or services
itself (i.e. the Group is a principal) or to arrange for those goods or services to be provided by the other
party (i.e. the Group is an agent).
The Group is a principal if it controls the specified goods or service before that goods or service is
transferred to a customer.
The Group is an agent if its performance obligation is to arrange for the provision of the specified good
or service by another party. In this case, the Group does not control the specified goods or service
provided by another party before that goods or service is transferred to the customer. When the Group
acts as an agent, it recognizes revenue in the amount of any fee or commission to which it expects to be
entitled in exchange for arranging for the specified goods or services to be provided by the other party.
F-36
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 307
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Revenue from contracts with customers (Continued)
Over time revenue recognition: measurement of progress towards complete satisfaction of a
performance obligation (Continued)
Costs to fulfil a contract
The Group incurs costs to fulfil a contract in its business activities, e.g. sponsorship services. The Group
first assesses whether these costs qualify for recognition as an asset in terms of other relevant standards,
failing which it recognises an asset for these costs only if they meet all of the following criteria:
(a) the costs relate directly to a contract or to an anticipated contract that the Group can specifically
identify;
(b) the costs generate or enhance resources of the Group that will be used in satisfying (or in
continuing to satisfy) performance obligations in the future; and
(c) the costs are expected to be recovered.
The asset so recognised is subsequently amortised to profit or loss on a systematic basis that is consistent
with the transfer to the customer of the goods or services to which the assets relate. The asset is subject
to impairment review.
Leases
Definition of a lease
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
For contracts entered into or modified or arising from business combinations on or after the date of
initial application, the Group assesses whether a contract is or contains a lease based on the definition
under IFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will not
be reassessed unless the terms and conditions of the contract are subsequently changed.
The Group as a lessee
Allocation of consideration to components of a contract
For a contract that contains a lease component and one or more additional lease or non-lease
components, the Group allocates the consideration in the contract to each lease component on the
basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of
the non-lease components.
Non-lease components are separated from lease component on the basis of their relative stand-alone
prices.
As a practical expedient, leases with similar characteristics are accounted on a portfolio basis when the
Group reasonably expects that the effects on the financial statements would not differ materially from
individual leases within the portfolio.
F-37
308 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessee (Continued)
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to leases of buildings/motor vehicles/
machinery and equipment that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option. It also applies the recognition exemption for lease of low-value
assets. Lease payments on short-term leases and leases of low-value assets are recognized as expense
on a straight-line basis over the lease term.
Right-of-use assets
The cost of right-of-use asset includes:
the amount of the initial measurement of the lease liability;
any lease payments made at or before the commencement date, less any lease incentives received;
any initial direct costs incurred by the Group; and
an estimate of costs to be incurred by the Group in dismantling and removing the underlying
assets, restoring the site on which it is located or restoring the underlying asset to the condition
required by the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities.
Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying
leased assets at the end of the lease term are depreciated from commencement date to the end of the
useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term.
The Group presents right-of-use assets as a separate line item on the consolidated statement of financial
position.
Refundable rental deposits
Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair value.
Adjustments to fair value at initial recognition are considered as additional lease payments and included
in the cost of right-of-use assets.
F-38
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 309
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessee (Continued)
Lease liabilities
At the commencement date of a lease, the Group recognizes and measures the lease liability at the
present value of lease payments that are unpaid at that date. In calculating the present value of lease
payments, the Group uses the incremental borrowing rate at the lease commencement date if the
interest rate implicit in the lease is not readily determinable.
The lease payments include:
fixed payments (including in-substance fixed payments) less any lease incentives receivable;
variable lease payments that depend on an index or a rate, initially measured using the index or
rate as at the commencement date;
amounts expected to be payable by the Group under residual value guarantees;
the exercise price of a purchase option if the Group is reasonably certain to exercise the option;
and
payments of penalties for terminating a lease, if the lease term reflects the Group exercising an
option to terminate the lease.
After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-
use assets) whenever:
the lease term has changed or there is a change in the assessment of exercise of a purchase
option, in which case the related lease liability is remeasured by discounting the revised lease
payments using a revised discount rate at the date of assessment.
the lease payments change due to changes in market rental rates following a market rent review
or expected payment under a guaranteed residual value, in which cases the related lease liability
is remeasured by discounting the revised lease payments using the initial discount rate.
The Group presents lease liabilities as a separate line item on the consolidated statement of financial
position.
F-39
310 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessee (Continued)
Lease modifications
The Group accounts for a lease modification as a separate lease if:
the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
the consideration for the leases increases by an amount commensurate with the stand-alone price
for the increase in scope and any appropriate adjustments to that stand-alone price to reflect
the circumstances of the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease
liability based on the lease term of the modified lease by discounting the revised lease payments using
a revised discount rate at the effective date of the modification.
The Group accounts for the remeasurement of lease liabilities and lease incentives from lessor by making
corresponding adjustments to the relevant right-of-use asset. When the modified contract contains a
lease component and one or more additional lease or non-lease components, the Group allocates the
consideration in the modified contract to each lease component on the basis of the relative stand-alone
price of the lease component and the aggregate stand-alone price of the non-lease components.
The Group as a lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms
of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset
to the lessee, the contract is classified as a finance lease. All other leases are classified as operating
leases.
Amounts due from lessees under finance leases are recognised as receivables at commencement date
at amounts equal to net investments in the leases, measured using the interest rate implicit in the
respective leases. Initial direct costs are included in the initial measurement of the net investments in
the leases. Interest income is allocated to accounting periods so as to reflect a constant periodic rate
of return on the Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term
of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset, and such costs are recognised as an expense on a
straight-line basis over the lease term. Upon application of IFRS 16 on 1 January 2019, variable lease
payments for operating leases that depend on an index or a rate are estimated and included in the total
lease payments to be recognised on a straight-line basis over the lease term. Variable lease payments
that do not depend on an index or a rate are recognised as income when they arise.
F-40
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 311
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessor (Continued)
Allocation of consideration to components of a contract
When a contract includes both leases and non-lease components, the Group applies IFRS 15 to allocate
consideration in a contract to lease and non-lease components. Non-lease components are separated
from lease component on the basis of their relative stand-alone selling prices.
Refundable rental deposits
Refundable rental deposits received are accounted under IFRS 9 and initially measured at fair value.
Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.
Lease modification
The Group accounts for a modification to an operating lease as a new lease from the effective date of
the modification, considering any prepaid or accrued lease payments relating to the original lease as
part of the lease payments for the new lease.
Sale and leaseback transactions
The Group applies the requirements of IFRS 15 to assess whether sale and leaseback transaction
constitutes a sale by the Group.
The Group as a buyer-lessor
For a transfer of asset that does not satisfy the requirements of IFRS 15 to be accounted for as a sale of
asset, the Group as a buyer-lessor does not recognise the transferred asset and recognises a receivable
arising from sale and leaseback arrangements equal to the transfer proceeds within the scope of IFRS 9.
For a transfer of asset that satisfies the requirements of IFRS 15 to be accounted for as a sale of asset,
the Group as a buyer-lessor accounts for the purchase of the asset applying applicable standards, and
for the lease applying the lessor accounting requirements in accordance with IFRS 16.
Leasehold land and building
When the Group makes payments for ownership interests of properties which includes both leasehold
land and building elements, the entire consideration is allocated between the leasehold land and the
building elements in proportion to the relative fair values at initial recognition.
To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land
that is accounted for as an operating lease is presented as “right-of-use assets” in the consolidated
statement of financial position. When the consideration cannot be allocated reliably between non-
lease building element and undivided interest in the underlying leasehold land, the entire properties
are classified as property, plant and equipment.
F-41
312 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Foreign currencies
In preparing the financial statements of each individual group entities, transactions in currencies other
than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges
prevailing on the dates of the transactions. At the end of the reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing on the date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary
items, are recognised in profit or loss in the period in which they arise.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the
Group’s operations are translated into the presentation currency of the Group using exchange rates
prevailing at the end of each reporting period. Income and expenses items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which
case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising,
if any, are recognised in other comprehensive income and accumulated in equity under the heading of
translation reserve (attributed to non-controlling interests as appropriate).
Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign
operation are treated as assets and liabilities of that foreign operation and retranslated at the rate of
exchange prevailing at the end of the reporting period. Exchange differences arising are recognised in
other comprehensive income.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use
or sale, are added to the cost of those assets until such time as the assets are substantially ready for
their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply
with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which
the Group recognises as expenses the related costs for which the grants are intended to compensate.
Specifically, government grants whose primary condition is that the Group should purchase, construct
or otherwise acquire non-current assets are recognised as deferred income.
F-42
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 313
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Government grants (Continued)
Government grants that are receivable as compensation for expenses or losses already incurred or
for the purpose of giving immediate financial support to the Group with no future related costs are
recognised in profit or loss in the period in which they become receivable.
Employee benefits
Social welfare
Social welfare expenditure refers to payments for employees’ social welfare system established by
the Government of the PRC, including social insurance, housing funds and other social welfare
contributions. The Group contributes on a monthly basis to these funds based on certain percentage
of the salaries of the employees and the contributions are recognised in profit or loss for the period
when employees have rendered service entitling them to the contribution. The Group’s liabilities in
respect of these funds are limited to the contribution payable in the reporting period.
Contributions to pension schemes and annuity plans
Payments to defined contribution retirement benefits plan are charged as expenses when employees have
rendered service entitling them to the contributions. The employees of the Group participate in various
defined contribution pension schemes principally organised by municipal and provincial governments
(the “Social Security Plans”). The Group contributes for employees based on a certain percentage of
their salary and within the limit prescribed by the government to the pension scheme on a monthly
basis. The contribution shall be managed and paid to retired employees through labor and social welfare
authorities in accordance with the provisions. There are no forfeited contributions in the Social Security
Plans. In addition to the above-mentioned Social Security Plans, certain employees participate in the
employer-sponsored enterprise annuity plans (the “annuity plans”) as well. The Group shall contribute
to the annuity plans in accordance with agreed bases and percentages. Forfeited contributions by those
employees who leave the annuity plans prior to the full vesting of their contributions are not used to
reduce the existing level of contributions and are recorded in the public account of the annuity plans
to be attributed to the members of the annuity plans after fulfilling the approval procedures.
Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees
have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuations being carried out at the end of each annual
reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes
to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected
immediately in the consolidated statement of financial position with a charge or credit recognised in
other comprehensive income in the period in which they occur. Remeasurement recognised in other
comprehensive income is reflected immediately in retained earnings and will not be reclassified to
profit or loss.
F-43
314 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Employee benefits (Continued)
Retirement benefit costs and termination benefits (Continued)
Past service cost is recognised in profit or loss in the period of a plan amendment or curtailment and a
gain or loss on settlement is recognised when settlement occurs. When determining past service cost,
or a gain or loss on settlement, an entity shall remeasure the net defined benefit liability or asset using
the current fair value of plan assets and current actuarial assumptions, reflecting the benefits offered
under the plan and the plan assets before and after the plan amendment, curtailment or settlement,
without considering the effect of asset ceiling (i.e. the present value of any economic benefits available
in the form of refunds from the plan or reductions in future contributions to the plan).
Net interest is calculated by applying the discount rate at the beginning of the period to the net defined
benefit liability or asset. However, if the Group remeasures the net defined benefit liability or asset
before plan amendment, curtailment or settlement, the Group determines net interest for the remainder
of the annual reporting period after the plan amendment, curtailment or settlement using the benefits
offered under the plan and the plan assets after the plan amendment, curtailment or settlement and
the discount rate used to remeasure such net defined benefit liability or asset, taking into account any
changes in the net defined benefit liability or asset during the period resulting from contributions or
benefit payments.
Defined benefit costs are categorised as follows:
service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements);
net interest expense or income; and
remeasurement.
The retirement benefit obligation recognised in the consolidated statement of financial position
represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from
this calculation is limited to the present value of any economic benefits available in the form of refunds
from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the Group entity can no longer
withdraw the offer of the termination benefit and when it recognises any related restructuring costs.
Discretionary contributions made by employees or third parties reduce service cost upon payment of
these contributions to the plan.
When the formal terms of the plans specify that there will be contributions from employees or third
parties, the accounting depends on whether the contributions are linked to service, as follows:
If the contributions are not linked to services (for example contributions are required to reduce
a deficit arising from losses on plan assets or from actuarial losses), they are reflected in the
remeasurement of the net defined benefit liability or asset.
F-44
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 315
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Employee benefits (Continued)
Retirement benefit costs and termination benefits (Continued)
If contributions are linked to services, they reduce service costs. For the amount of contribution
that is dependent on the number of years of service, the entity reduces service cost by attributing
the contributions to periods of service using the attribution method required by IAS 19 paragraph
70 for the gross benefits.
Short-term and other long-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be
paid as and when employees rendered the services. All short-term employee benefits are recognized as
an expense unless another IFRS requires or permits the inclusion of the benefit in the cost of an asset.
A liability is recognized for benefits accruing to employees (such as wages and salaries, annual leave
and sick leave) after deducting any amount already paid.
Liabilities recognized in respect of other long-term employee benefits are measured at the present value
of the estimated future cash outflows expected to be made by the Group in respect of services provided
by employees up to the reporting date. Any changes in the liabilities’ carrying amounts resulting from
service cost, interest and remeasurements are recognised in the profit or loss except to the extent that
another IFRS requires or permits their inclusion in the cost of an asset.
The liability related to the above supplementary benefit obligations existing at the end of each reporting
period, is calculated by independent actuaries using the Projected Unit Credit Method and is recorded
as a liability in the consolidated statement of financial position. The liability is determined through
discounting the amount of future benefits that the employees are entitled for their services in the
current and prior periods. The discount rates are based on the yields of RMB treasury bonds which
have terms to maturity approximating the terms of the related liability. All actuarial gains and losses
are recognized immediately through other comprehensive income in order for the net pension asset or
liability recognized in the consolidated statement of financial position to reflect the full value of the
plan deficit or surplus.
Share-based payment transactions
Share options granted to employees
The Company’s subsidiary Haitong International Securities Group Limited (“HISGL”) operates a share
option scheme for the purpose of providing incentives and rewards to eligible participants who
contribute to the success of the Group’s operations. Employees (including directors) of the Group receive
remuneration in the form of share-based payment transactions, whereby employees render services as
consideration for equity instruments (“equity settled transactions”).
Equity-settled share-based payments to employees and others providing similar services are measured
at the fair value of the equity instruments at the grant date.
F-45
316 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Share-based payment transactions (Continued)
Share options granted to employees (Continued)
The fair value of the equity-settled share-based payments determined at the grant date without taking
into consideration all non-market vesting conditions is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity (share-based payment reserve). At the end of each reporting period,
the Group revises its estimate of the number of equity instruments expected to vest base on assessment
of all relevant non-market vesting conditions. The impact of the revision of the original estimates, if
any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with
a corresponding adjustment to share options reserve. For share options that vest immediately at the
date of grant, the fair value of the share options granted is expensed immediately to profit or loss.
When share options are exercised, the amount previously recognised in share options reserve will
be transferred to capital reserve. When share options are forfeited after the vesting date or are still
not exercised at the expiry date, the amount previously recognised in share options reserve will be
transferred to capital reserve.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before
income tax as reported in the consolidated statement of profit or loss because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax base used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible temporary difference to the
extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax
liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated
with such investments and interests are only recognised to the extent that it is probable that there will
be sufficient taxable profits against which to utilise the benefits of the temporary differences and they
are expected to reverse in the foreseeable future.
F-46
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 317
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Taxation (Continued)
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group
applies IAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately.
Temporary differences relating to right-of-use assets and lease liabilities are not recognised at initial
recognition and over the lease terms due to application of the initial recognition exemption.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case the current and the
deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where
current tax or deferred tax arises from the initial accounting for a business combination, the tax effect
is included in the accounting for the business combination.
Property and equipment
Property and equipment including leasehold land (classified as finance lease) and building held for use
in the production or supply of goods or services, or for administrative purpose (other than construction
in progress), are stated in the consolidated statement of financial position at cost less accumulated
depreciation and accumulated impairment losses, if any.
Properties in the course of construction for production, supply or administrative purposes are carried
at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are
classified to the appropriate categories of property and equipment when completed and ready for
intended use. Depreciation of these assets, on the same basis as other property assets, commences
when the assets are ready for their intended use.
F-47
318 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Property and equipment (Continued)
Depreciation is recognised so as to write off the cost of items of property and equipment (other than
construction in progress) less their residual values over their estimated useful lives, using straight line
method. The estimated useful lives, residual values and depreciation method are reviewed at the end of
each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or
retirement of an item of property and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or loss.
The estimated residual value rates and useful lives of each class of property and equipment are as
follows:
Estimated residual
Classes value rates Useful lives
Land and buildings 3 – 5% 30 – 40 years
Furniture, fixtures and equipment 3 – 10% 5 – 11 years
Transportation equipment 3 – 10% 5 – 8 years
Electronic equipment 3 – 10% 3 – 5 years
Assets held for operating lease businesses 15% 18 – 25 years
Leasehold improvements nil Over the lease term
Buildings under development for future shareholder-occupied purpose
When buildings are in the course of development for production or administrative purposes, the
amortisation of prepaid lease payment provided during the construction period in included as part of
costs of buildings under construction. Buildings under construction are carried at cost, less any identified
impairment losses. Deprecation of buildings commences when they are available for use (i.e. when
they are in the location and condition necessary for them to be capable of operating in the manner
intended by management.)
Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation.
Investment properties are initially measured at cost, including any directly attributable expenditure.
Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated
depreciation and any accumulated impairment losses.
The above investment properties are depreciated over their estimated useful lives of 30 years and
after taking into account their estimated residual value of 3%-5%, using the straight-line method.
Depreciation is recognised so as to write off the cost of investment properties over their estimated useful
lives and after taking into account of their estimated residual value, using the straight-line method.
F-48
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 319
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Investment properties (Continued)
An investment property is derecognised upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from the disposals. Any gain or
loss arising on derecognition of the property (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which
the item is derecognised.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated
amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite lives
is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and
amortisation method are reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives
that are acquired separately are carried at cost less any subsequent accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill and are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful
lives are reported at cost less accumulated amortisation and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
Derecognition of Intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset are measured at the
difference between the net disposal proceeds and the carrying amount of the asset and are recognised
in profit or loss in the period when the asset is derecognised.
Impairment on property and equipment, right-of-use assets, contract costs and intangible
assets other than goodwill
At the end of the reporting period, the Group reviews the carrying amounts of its property and
equipment, right-of-use assets, intangible assets with finite useful lives and contract costs to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of
the impairment loss, if any. Intangible assets with indefinite useful lives and intangible assets not yet
available for use are tested for impairment annually, and whenever there is an indication that they
may be impaired.
F-49
320 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Intangible assets (Continued)
Impairment on property and equipment, right-of-use assets, contract costs and intangible
assets other than goodwill (Continued)
The recoverable amount of property, plant and equipment, right-of-use assets, and intangible assets
are estimated individually. When it is not possible to estimate the recoverable amount individually,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
In addition, the Group assesses whether there is indication that corporate assets may be impaired. If
such indication exists, corporate assets are also allocated to individual cash-generating units, when a
reasonable and consistent basis of allocation can be identified, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Before the Group recognises an impairment loss for assets capitalised as contract costs under IFRS 15,
the Group assesses and recognises any impairment loss on other assets related to the relevant contracts
in accordance with applicable standards. Then, impairment loss, if any, for assets capitalised as contract
costs is recognised to the extent the carrying amounts exceeds the remaining amount of consideration
that the Group expects to receive in exchange for related goods or services less the costs which relate
directly to providing those goods or services that have not been recognised as expenses. The assets
capitalised as contract costs are then included in the carrying amount of the cash-generating unit to
which they belong for the purpose of evaluating impairment of that cash-generating unit.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the
asset (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable
amount. For corporate assets or portion of corporate assets which cannot be allocated on a reasonable
and consistent basis to a cash-generating unit, the Group compares the carrying amount of a group of
cash-generating units, including the carrying amounts of the corporate assets or portion of corporate
assets allocated to that group of cash-generating units, with the recoverable amount of the group of
cash-generating units. In allocating the impairment loss, the impairment loss is allocated first to reduce
the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis
based on the carrying amount of each asset in the unit or the group of cash-generating units. The
carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if
measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would
otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit or the
group of cash-generating units. An impairment loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a revalued amount under another standard, in which case the impairment
loss is treated as a revaluation decrease under that standard.
F-50
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 321
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Intangible assets (Continued)
Impairment on property and equipment, right-of-use assets, contract costs and intangible
assets other than goodwill (Continued)
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit or a group of cash-generating units) is increased to the revised estimate of its recoverable amount,
but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or a cash-generating unit or a group
of cash-generating units) or in prior years. A reversal of an impairment loss is recognised immediately
in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined
on a first-in, first-out method. Net realisable value represents the estimated selling price for inventories
less all estimated costs of completion and costs necessary to make the sale.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of
a past event, it is probable that the Group will be required to settle that obligation, and the amount
of the obligation can be reliably estimated.
The amount recognized as provision is the best estimate of the consideration required to settle the
present obligation at the end of each reporting period, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value of those cash flows (when the effect
of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will
be received and the amount of the receivable can be measured reliably.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value except for trade receivables
arising from contracts with customers which are initially measured in accordance with IFRS 15.
Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial
liabilities (other than financial assets or financial liabilities at fair value through profit or loss(“FVTPL”))
are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at FVTPL are recognised immediately in profit or loss.
F-51
322 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
The effective interest method is a method of calculating the amortised cost of a financial asset or
financial liability and of allocating interest income and interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash receipts and payments
(including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial asset
or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Interest which are derived from the Group’s ordinary course of business are presented as revenue.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost:
the financial asset is held within a business model whose objective is to collect contractual cash
flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are subsequently measured at fair value through
other comprehensive income (“FVTOCI”):
the financial asset is held within a business model whose objective is achieved by both selling
and collecting contractual cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
All other financial assets are subsequently measured at FVTPL, except that at the date of initial
application of IFRS 9 initial recognition of a financial asset the Group may irrevocably elect to present
subsequent changes in fair value of an equity investment in other comprehensive income if that equity
investment is neither held for trading nor contingent consideration recognised by an acquirer in a
business combination to which IFRS 3 Business Combinations applies.
F-52
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 323
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Classification and subsequent measurement of financial assets (Continued)
A financial asset is held for trading if:
it has been acquired principally for the purpose of selling in the near term; or
on initial recognition it is a part of a portfolio of identified financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
In addition, the Group may irrevocably designate a financial asset that are required to be measured at
the amortised cost or FVTOCI as measured at FVTPL if doing so eliminates or significantly reduces an
accounting mismatch.
(i) Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost and debt instruments subsequently measured at FVTOCI.
Interest income is calculated by applying the effective interest rate to the gross carrying amount
of a financial asset, except for financial assets that have subsequently become credit-impaired
(see below). For financial assets that have subsequently become credit-impaired, interest income is
recognised by applying the effective interest rate to the amortised cost of the financial asset from
the next reporting period. If the credit risk on the credit-impaired financial instrument improves
so that the financial asset is no longer credit-impaired, interest income is recognised by applying
the effective interest rate to the gross carrying amount of the financial asset from the beginning
of the reporting period following the determination that the asset is no longer credit impaired.
(ii) Debt instruments classified as at FVTOCI
Subsequent changes in the carrying amounts for debt instruments classified as at FVTOCI as a
result of interest income calculated using the effective interest method, and foreign exchange
gains and losses are recognised in profit or loss. All other changes in the carrying amount of
these debt instruments are recognised in OCI and accumulated under the heading of investment
revaluation reserve of financial assets at FVTOCI. Impairment allowance are recognised in profit
or loss with corresponding adjustment to OCI without reducing the carrying amounts of these
debt instruments. When these debt instruments are derecognised, the cumulative gains or losses
previously recognised in OCI are reclassified to profit or loss.
F-53
324 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Classification and subsequent measurement of financial assets (Continued)
(iii) Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction
costs. Subsequently, they are measured at fair value with gains and losses arising from changes
in fair value recognised in OCI and accumulated in the FVTOCI reserve; and are not subject to
impairment assessment. The cumulative gain or loss will not be reclassified to profit or loss on
disposal of the equity investments, and will be transferred to retained earnings.
Dividends on these investments in equity instruments are recognised in profit or loss when the
Group’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of the investment. Dividends are included in the “Investment income
and gains (net)” line item in profit or loss.
(iv) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI
or designated as FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with
any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in
profit or loss includes any dividend or interest earned on the financial asset and is included in
the “Investment income and gains (net)” line item.
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
The Group performs impairment assessment under expected credit loss (“ECL”) model on financial
assets (including loans and advances, other loans and receivables, financial assets held under resale
agreements, advances to customers on margin financing, accounts receivable, placements to banks and
other financial institutions, deposits with other banks, debt instruments measured at FVTOCI, and other
items (lease receivables, contract assets, loan commitments and financial guarantee contracts) which
are subject to impairment under IFRS 9. The amount of ECL is updated at the end of each reporting
period to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life
of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime
ECL that is expected to result from default events that are possible within 12 months after the reporting
date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions and an assessment of both the current
conditions at the reporting date as well as the forecast of future conditions.
F-54
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 325
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
The Group always recognises lifetime ECL for accounts receivable recognised in accordance with IFRS 15.
To measure the ECL, account receivables have been grouped based on shared credit risk characteristics.
The Group collectively used a provision matrix with appropriate aging groupings to assess level of
provision rate.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there
has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL.
The assessment of whether lifetime ECL should be recognised is based on significant increases in the
likelihood or risk of a default occurring since initial recognition.
(i) Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date with
the risk of a default occurring on the financial instrument as at the date of initial recognition. In
making this assessment, the Group considers both quantitative and qualitative information that
is reasonable and supportable, including historical experience and forward-looking information
that is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk
has increased significantly:
Significant degradation of the obligor’s actual or expected internal credit risk level or
significant decrease of behaviour scores for assessing credit risks;
Actual or expected significant changes in external credit rating on the obligor or the debts;
Significant changes in values of collaterals pledged for the debt, which may reduce
obligor’s economic incentive to make repayments within the term specified in the contract
or affect probability of default incurred; for example, the obligor’s performance guarantee
ability is weakened due to decline in values of pledged securities, the obligor fails to
provide supplement collaterals as specified in the contract within a reasonable time or
the obligor may have stronger incentive to be in arrears with the debt.
Actual or expected adverse changes in the obligor’s business, financial or economic status,
which may result in significant changes in the obligor’s debt solvency;
Overdue information of interests or principals;
F-55
326 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(i) Significant increase in credit risk (Continued)
Significant changes in external market index for credit risks of specific financial instrument
or alike financial instrument with the same expected life; for example, the obligor’s credit
spread, credit default swap price for the obligor or other market information related to
the obligor;
Actual or expected significant changes in quality of credit supports provided by the
guarantor, which may reduce obligor’s economic incentive to make repayments within the
term specified in the contract; for example, if the guarantor will no longer provide financial
support for the obligor, that may result in bankruptcy or receivership of the obligor, or
increase in probability of these liabilities default when the obligor makes limited payment
of operating funds (such as salaries or payments to key suppliers) so as to arrange the
payment obligations of financial liabilities at a lower priority.
Actual or expected significant changes in quality of credit enhancement or support for
creditor’s rights issued in securitization, which may result in ability decrease of relevant
subordinated interest to absorb ECL.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk
has increased significantly since initial recognition when contractual payments are more than
30 days past due.
Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not
increased significantly since initial recognition if the debt instrument is determined to have low
credit risk at the reporting date. A debt instrument is determined to have low credit risk if i)
it has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash
flow obligations in the near term and iii) adverse changes in economic and business conditions
in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its
contractual cash flow obligations. The Group considers a debt instrument to have low credit risk
when it has an internal or external credit rating of ‘investment grade’ as per globally understood
definitions.
F-56
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 327
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(i) Significant increase in credit risk (Continued)
For loan commitments and financial guarantee contracts, the date that the Group becomes a
party to the irrevocable commitment is considered to be the date of initial recognition for the
purposes of assessing impairment. In assessing whether there has been a significant increase in
the credit risk since initial recognition of a loan commitment, the Group considers changes in the
risk of a default occurring on the loan to which a loan commitment relates; for loan commitments
and financial guarantee contracts, the Group considers the changes in the risk that the specified
debtor will default on the contract.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has
been a significant increase in credit risk and revises them as appropriate to ensure that the criteria
are capable of identifying significant increase in credit risk before the amount becomes past due.
(ii) Definition of default
For internal credit risk management, the Group considers an event of default occurs when
information developed internally or obtained from external sources indicates that the debtor
is unlikely to pay its creditors, including the Group, in full (without taking into account any
collaterals held by the Group).
Irrespective of the above, the Group considers that default has occurred when the instrument
is more than 90 days past due.
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events of default that have a detrimental
impact on the estimated future cash flows of that financial asset have occurred. Evidence that a
financial asset is credit-impaired includes observable data about the following events:
(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficulty, having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider;
F-57
328 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(iii) Credit-impaired financial assets (Continued)
(d) it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
(e) the disappearance of an active market for that financial asset because of financial
difficulties.
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty
is in severe financial difficulty and there is no realistic prospect of recovery, for example, when
the counterparty has been placed under liquidation or has entered into bankruptcy proceedings.
Financial assets written off may still be subject to enforcement activities under the Group’s
recovery procedures, taking into account legal advice where appropriate. A write-off constitutes
a derecognition event. Any subsequent recoveries are recognised in profit or loss.
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data adjusted by forward-
looking information. Estimation of ECL reflects an unbiased and probability-weighted amount
that is determined with the respective risks of default occurring as the weights.
Generally, the ECL is estimated as the difference between all contractual cash flows that are
due to the Group in accordance with the contract and all the cash flows that the Group expects
to receive, discounted at the effective interest rate determined at initial recognition. For a lease
receivable, the cash flows used for determining the ECL is consistent with the cash flows used
in measuring the lease receivable in accordance with IFRS 16 Leases.
For a financial guarantee contract, the Group is required to make payments only in the event
of a default by the debtor in accordance with the terms of the instrument that is guaranteed.
Accordingly, the expected losses is the present value of the expected payments to reimburse the
holder for a credit loss that it incurs less any amounts that the Group expects to receive from
the holder, the debtor or any other party.
F-58
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 329
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(v) Measurement and recognition of ECL (Continued)
For undrawn loan commitments, the ECL is the present value of the difference between the
contractual cash flows that are due to the Group if the holder of the loan commitments draws
down the loan, and the cash flows that the Group expects to receive if the loan is drawn down.
For ECL on financial guarantee contracts or on loan commitments for which the effective interest
rate cannot be determined, the Group will apply a discount rate that reflects the current market
assessment of the time value of money and the risks that are specific to the cash flows but only
if, and to the extent that, the risks are taken into account by adjusting the discount rate instead
of adjusting the cash shortfalls being discounted.
Where ECL is measured on a collective basis or cater for cases where evidence at the individual
instrument level may not yet be available, the financial instruments are grouped on the following
basis:
Nature of financial instruments;
Past-due status;
Nature, size and industry of debtors; and
External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics.
Interest income is calculated based on the gross carrying amount of the financial asset unless the
financial asset is credit impaired, in which case interest income is calculated based on amortised
cost of the financial asset.
For financial guarantee contracts and loan commitments, the loss allowances are recognised at
the higher of the amount of the loss allowance determined in accordance with IFRS 9; and the
amount initially recognised less, where appropriate, cumulative amount of income recognised
over the guarantee period.
F-59
330 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(v) Measurement and recognition of ECL (Continued)
For undrawn loan commitments, the loss allowances are the present value of the difference
between:
(a) the contractual cash flows that are due to the Group if the holder of the loan commitment
draws down the loan: and
(b) the cash flows that the Group expects to receive if the loan is drawn down.
Except for investments in debt instruments that are measured at FVTOCI, loan commitments and
financial guarantee contracts, the Group recognises an impairment gain or loss in profit or loss
for all financial instruments by adjusting their carrying amount, with the exception of account
receivables, finance lease receivables, other receivables and prepayments, loans and advances,
other loans and receivables, financial assets held under resale agreements, advance to customers
on margin financing, placements to banks and other financial institutions, and deposits with other
banks, where the corresponding adjustments is recognised through a loss allowance account. For
investments in debt instruments that are measured at FVTOCI, the loss allowance is recognised
in OCI and accumulated in the FVTOCI reserve without reducing the carrying amounts of these
debt instruments. Such amount represents the changes in the FVTOCI reserve in relation to
accumulated loss allowance.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the transferred asset, the Group recognises
its retained interest in the asset and an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the
Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
F-60
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 331
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Derecognition of financial assets (Continued)
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s
carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain
or loss previously accumulated in the FVTOCI reserve is reclassified to profit or loss.
On derecognition of an investment in equity instrument which the Group has elected on initial
recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments
revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the group after
deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds
received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No
gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s
own equity instruments.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method
or at FVTPL.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of
an acquirer in a business combination to which IFRS 3 applies, (ii) held for trading or (iii) it is designated
as at FVTPL.
F-61
332 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial liabilities and equity instruments (Continued)
Financial liabilities at FVTPL (Continued)
A financial liability is held for trading if:
it has been acquired principally for the purpose of repurchasing in the near term; or
on initial recognition it is a part of an identified portfolio of financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon
initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise, or
the financial liability forms part of a group of financial assets or financial liabilities or both, which
is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s
documented risk management or investment strategy, and information about the grouping is
provided internally on that basis; or
it forms part of a contract containing one or more embedded derivative, and IFRS 9 permits the
entire combined contract (assets or liability) to be designated as at FVTPL.
For financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the
financial liability that is attributable to changes in the credit risk of that liability is recognised in other
comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in
other comprehensive income would create or enlarge an accounting mismatch in profit or loss. For
financial liabilities that contain embedded derivatives, such as convertible loan notes, the changes in
fair value of the embedded derivatives are excluded in determining the amount to be presented in other
comprehensive income. Changes in fair value attributable to a financial liability’s credit risk that are
recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead,
they are transferred to retained earnings upon derecognition of the financial liability.
Financial liabilities at amortised cost
Financial liabilities including deposits from central banks, deposits from other banks, customer accounts,
borrowings, short-term financing bills payables, placements from other financial institutions, accounts
payable to brokerage clients, bond payables, financial assets sold under repurchase agreements, other
payables and amount due to a subsidiary are subsequently measured at amortised cost, using the
effective interest method.
F-62
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 333
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Derecognition/non-substantial modification of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or have expired. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in profit or loss.
For non-substantial modifications of financial liabilities that do not result in derecognition, the carrying
amount of the relevant financial liabilities will be calculated at the present value of the modified
contractual cash flows discounted at the financial liabilities’ original effective interest rate. Transaction
costs or fees incurred are adjusted to the carrying amount of the modified financial liabilities and are
amortised over the remaining term. Any adjustment to the carrying amount of the financial liability is
recognised in profit or loss at the date of modification.
Compound financial instruments
The component parts of the convertible loan notes issued by the Group are classified separately as
financial liabilities and equity in accordance with the substance of the contractual arrangements and
the definitions of a financial liability and an equity instrument. Conversion option that will be settled
by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s
own equity instruments is an equity instrument.
At the date of issue, both the debt component and derivative components are recognised at fair value.
In subsequent periods, the debt component of the convertible loan notes is carried at amortised cost
using the effective interest method. The derivative component is measured at fair value with changes
in fair value recognised in profit or loss.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognised and included
in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion
option classified as equity will remain in equity until the conversion option is exercised, in which
case, the balance recognised in equity will be transferred to share premium and share capital. Where
the conversion option remains unexercised at the maturity date of the convertible note, the balance
recognised in equity will be transferred to retained earnings. No gain or loss is recognised in profit or
loss upon conversion or expiration of the conversion option.
Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and
equity components in proportion to the allocation of the gross proceeds. Transaction costs relating
to the equity component are charged directly to equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability portion and amortised over the period
of the convertible loan notes using the effective interest method.
F-63
334 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Derivative financial instruments
Derivatives are initially recognised at fair value at the date when derivative contracts are entered into
and are subsequently remeasured to their fair value at the end of the reporting period. The resulting
gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective
as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the
nature of the hedge relationship.
All derivatives are recognised as assets when the fair value is positive and as liabilities when the fair
value is negative.
Embedded Derivative
Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of IFRS 9
are not separated. The entire hybrid contract is classified and subsequently measured in its entirety as
either amortised cost or fair value as appropriate.
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope
of IFRS 9 are treated as separate derivatives when they meet the definition of a derivative, their risks
and characteristics are not closely related to those of the host contracts and the host contracts are not
measured at FVTPL.
Generally, multiple embedded derivatives in a single instrument that are separated from the host
contracts are treated as a single compound embedded derivative unless those derivatives relate to
different risk exposures and are readily separable and independent of each other.
Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the net amount presented in the consolidated
statement of financial position when, and only when, the Group currently has a legally enforceable
right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
Financial assets sold under repurchase agreements and financial assets held under resale
agreements
Financial assets sold under repurchase agreements continue to be recognised, which do not result in
derecognition of the financial assets, and are recorded as “FVTOCI” or “FVTPL” as appropriate. The
corresponding liability is included in “financial assets sold under repurchase agreements”. Financial
assets held under resale agreements to resell are recorded as “financial assets held under resale
agreements”. Financial assets sold under repurchase agreements and financial assets held under resale
agreements are initially measured at fair value and are subsequently measured at amortised cost using
the effective interest method.
F-64
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 335
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets sold under repurchase agreements and financial assets held under resale
agreements (Continued)
(a) Financial assets held under resale agreements
Financial assets that have been purchased under agreements with a commitment to resell at
a specific future date are not recognised in the statement of financial position. The cost of
purchasing such assets is presented under “financial assets held under resale agreements” in
the consolidated statement of financial position.
(b) Financial assets sold under repurchase agreements
Financial assets sold subject to agreements with a commitment to repurchase at a specific future
date are not derecognised in the statement of financial position. The proceeds from selling
such assets are presented under “financial assets sold under repurchase agreements” in the
consolidated statement of financial position.
Hedge accounting
The Group designates certain derivatives and bank loans for cash flow hedges, or hedges of net
investments in foreign operations.
At the inception of the hedging relationship the Group documents the relationship between the
hedging instrument and the hedged item, along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing
basis, the Group documents whether the hedging instrument that is used in a hedging relationship is
highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to
the hedged risk.
Assessment of hedging relationship and effectiveness
For hedge effectiveness assessment, the Group considers whether the hedging instrument is effective
in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk,
which is when the hedging relationships meet all of the following hedge effectiveness requirements:
there is an economic relationship between the hedged item and the hedging instrument;
the effect of credit risk does not dominate the value changes that result from that economic
relationship; and
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of
the hedged item that the Group actually hedges and the quantity of the hedging instrument
that the entity actually uses to hedge that quantity of hedged item.
F-65
336 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Hedge accounting (Continued)
Assessment of hedging relationship and effectiveness (Continued)
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge
ratio but the risk management objective for that designated hedging relationship remains the same,
the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it
meets the qualifying criteria again.
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments
that are designated and qualify as cash flow hedges is recognised in other comprehensive income and
accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair
value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion
is recognised immediately in profit or loss, and is included in the other income and gains line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are
reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same
line as the recognised hedged item. However, when the hedged forecast transaction results in the
recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised
in other comprehensive income and accumulated in equity are removed from equity and included in
the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer
does not affect other comprehensive income. Furthermore, if the Group expects that some or all of the
loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is
immediately reclassified to profit or loss.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any
gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in
other comprehensive income and accumulated under the heading of translation reserve. The gain or
loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the
“other gains or losses” line item.
Gains or losses on the hedging instrument relating to the effective portion of hedge accumulated in
the translation reserve are reclassified to profit or loss on disposal of foreign operation.
Discontinuation of hedge accounting
The Group discontinues hedge accounting prospectively only when the hedging relationship (or a
part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes
instances when the hedging instrument expires or is sold, terminated or exercised. Discontinuing hedge
accounting can either affect a hedging relationship in its entirety or only a part of it (in which case
hedge accounting continues for the remainder of the hedging relationship).
F-66
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 337
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Hedge accounting (Continued)
Discontinuation of hedge accounting (Continued)
For cash flow hedge, any gain or loss recognised in other comprehensive income and accumulated in
equity at that time remains in equity and is recognised when the forecast transactions is ultimately
recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or
loss accumulated in equity is recognised immediately in profit or loss.
Securities lending
The Group lends investment securities to clients and the cash collaterals balance required under the
securities lending agreements and the interest arisen from these are classified as “accounts payable
to brokerage clients”. For those securities held by the Group lent to clients that do not result in the
derecognition of financial assets, they are included in related financial assets.
Financial guarantee contracts
Financial guarantee contract is contract that require the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance
with the terms of a debt instrument, namely the payment of principal and/or interests. Acceptance
includes the honour commitment made by the note sent to customers by the Group. Acceptance is listed
as a financial guarantee and credit commitment transaction and is disclosed as contingent liabilities
and commitments
The financial guarantee contracts issued by a group entity are initially measured at their fair values and,
if not designed as at FVTPL, are subsequently measured at the higher of:
According to the amount of contractual obligations according to IAS 37; And
The amount initially recognised less, when appropriate, cumulative amortisation recognised in
accordance with the revenue recognition policies.
The financial guarantee contracts issued by the Haitong Bank normally have a stated maturity date and a
periodic fee, usually paid in advance on a quarterly basis. This fee varies depending on the counterparty
risk, the amount and the term of the contract. Therefore, the fair value of the financial guarantee
contracts issued by the Haitong Bank, at the inception date, equal the initial fee received, which is
recognised in the income statement over the period to which it relates. The subsequent periodic fees
are recognised in the income statement in period to which they relate.
F-67
338 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash
on hand and demand deposits, and short term highly liquid investments that are readily convertible
into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short
maturity of generally within three months when acquired, less bank overdrafts which are repayable on
demand and form an integral part of the Group’s cash management.
For the purpose of the consolidated statement of financial position, cash and bank balances comprise
cash on hand and at banks, including term deposits, which are not restricted as to use.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT
In the application of the Group’s accounting policies, which are described in Note 3, the directors of
the Company are required to make judgements estimates and assumptions about the carrying amounts
of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods.
Measurement of ECL
The Group regularly reviews its finance leases receivable, financial assets measurement at amortised cost
and debt instruments at fair value through other comprehensive income to assess ECL on a periodic
basis.
The Group estimates the amount of loss allowance for ECL on the above mentioned financial assets and
finance lease receivables, measuring as the asset’s carrying amount and the present value of estimated
future cash flows with the consideration of expected future credit loss of these financial assets and
finance lease receivables. The assessment of the credit risk involves high degree of estimation and
uncertainty. When the actual future cash flows are less than expected or more than expected, a material
impairment loss or a material reversal of impairment loss may arise, accordingly.
F-68
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 339
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT (CONTINUED)
Measurement of ECL (Continued)
The following significant judgements are required in applying the accounting requirements for
measuring the ECL:
Significant increase of credit risk
An asset moves to stage 2 when its credit risk has increased significantly since initial recognition. In
assessing whether the credit risk of an asset has significantly increased, the Group takes into account
qualitative and quantitative reasonable and supportable forward looking information, which are detailed
in note 76.
Models and assumptions used
The Group uses various models and assumptions in estimating ECL. Judgement is applied in identifying
the most appropriate model for each type of asset, as well as for determining the assumptions used
in these models, including assumptions that relate to key drivers of credit risk. Details are set out in
note 76.
Forward-looking information
When measuring ECL the Group uses reasonable and supportable forward looking information, which
is based on assumptions for the future movement of different economic drivers and how these drivers
will affect each other. Details are set out in note 76.
Probability of default (PD)
PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood of default over a given
time horizon, the calculation of which includes historical data, assumptions and expectations of future
conditions. Details are set out in note 76.
Loss given default (LGD)
LGD is an estimate of the loss arising on default. It is based on the difference between the contractual
cash flows due and those that the lender would expect to receive, taking into account cash flows from
collateral and integral credit enhancements. Details are set out in note 76.
Fair value measurement of financial instruments
If the market for a financial instrument is not active, the Group estimates fair value by using a valuation
technique. Valuation techniques include using recent prices in arm’s length market transactions between
knowledgeable and willing parties, if available, reference to the current fair value of another instrument
that is substantially the same, or discounted cash flow analyses and option pricing models. To the extent
practicable, valuation technique makes the maximum use of observable market inputs. However, where
observable market inputs are not available, management needs to make estimates and use alternatives
on such unobservable market inputs.
F-69
340 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT (CONTINUED)
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-
generating units to which goodwill has been allocated. The recoverable amount is the higher of an
asset’s fair value less costs of disposal and the present value of the estimated future cash flow expected
to be derived from the asset. The value in use calculation requires the Group to estimate the future
cash flows expected to arise from the cash-generating unit and an appropriate discount rate in order
to calculate the present value. Where the actual future cash flows are less than expected, a material
impairment loss may arise. Details of the recoverable amount calculation are set out in Note 24.
Principal versus agent consideration (principal)
The Group engages in commodity trading. The Group concluded that the Group acts as the principal
for such transactions as it controls the specified good before it is transferred to the customer after
taking into consideration indicators such as the Group is primarily responsible for fulfilling the promise
to provide the goods, and the Group has inventory risk.
Income taxes
There are certain transactions and activities for which the ultimate tax determination is uncertain during
the ordinary course of business. Where the final tax outcome of these matters is different from the
amounts that were initially estimated, such differences will impact the current income tax and deferred
income tax in the period during which such a determination is made.
Determination on classification of financial assets
Classification and measurement of financial assets depends on the result of whether the contractual
terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding and the business model test.
The Group determines the business model at a level that reflects how groups of financial assets are
managed together to achieve a particular business objective. This assessment includes judgement
reflecting all relevant evidence including how the performance of assets is evaluated and their
performance measured, the risks that affect the performance of assets and how these are managed
and how the managers of the assets are compensated. The Group monitors financial assets measured
at amortized cost or FVTOCI that are derecognized prior to their maturity to understand the reason
for their disposal and whether the reasons are consistent with the objective of the business for which
the assets was held. Monitoring is part of the Group’s continuous assessment of whether the business
model for which the remaining financial assets are held continues to be appropriate and if it is not
appropriate whether there has been a change in business model and so a prospective change to the
classification of those assets.
When the Group assesses whether the contractual cash flows of the financial assets are consistent with
basic lending arrangements, the main judgements are described as below: whether the principal amount
may change over the life of the financial asset (for example, if there are prepayments); whether the
interest includes only consideration for the time value of money, credit risk, other basic lending risks
and a profit margin and cost, associated with holding the financial asset for a particular period of time.
F-70
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 341
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT (CONTINUED)
Consolidation of structured entities
All facts and circumstances must be taken into consideration in the assessment of whether the Group,
as an investor, controls the investee. The principle of control sets out the following three elements of
control: (a) power over the investee; (b) exposure, or rights, to variable returns from involvement with
the investee; and (c) the ability to use power over the investee to affect the amount of the investor’s
returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
For structured entities where the Group acts as manager or invests in, the Group considers the scope
of its decision-making authority and assesses whether the combination of investments it holds together
with its remuneration, credit enhancements and other interests creates exposure to variability of returns
from the activities of the structured entities that is of such significance that it indicates that the Group
is a principal. The structured entities are consolidated if the Group acts in the role of principal. Details
of consolidated structured entities and unconsolidated structured entities are set out in Notes 69 and
70 to the consolidated financial statements respectively.
5. SEGMENT REPORTING
Information reported to the chief operating decision maker (the “CODM”), being the board of directors
of the Company, for the purposes of resource allocation and assessment of segment performance
focuses on the nature of products sold and services provided by the Group, which is also consistent
with the Group’s basis of organization, whereby the businesses are organized and managed separately
as individual strategic business units that offers different products and serves different markets. With
changes in environment of security market and constant development of various business activities, the
Group will make adjustments to business segments in order to facilitate implementation of the Group’s
strategic planning and satisfy internal management in the meantime. The Group’s business segments
are classified in accordance with the requirements of IFRSs, and are based on the internal organization
structure, management requirements and internal reporting system. The reporting segments are
determined based on business segments. A business segment is a component of the Group with all
the following conditions satisfied: (1) such component is able to generate revenue and expenses in
the ordinary course of the Group, (2) management of the Group periodically evaluates the operating
results of these reporting segments to make decisions about resources to be allocated to the segments
and assess their performance; (3) the Group has access to such component’s accounting information
including financial position, operating results and cash flows. If two or more business segments have
similar economic characteristics or a similar business model, they may be combined as one business
segment. Based on its strategic planning and internal management requirements, the Group determines
six business segments: wealth management, investment banking, asset management, trading and
institution, finance lease and others. Classification of reporting segments is consistent with that of
business segments.
F-71
342 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
5. SEGMENT REPORTING (CONTINUED)
Segment information is measured in accordance with the accounting policies and measurement criteria
adopted by each segment when reporting to management, which are consistent with the accounting
and measurement criteria in the preparation of the consolidated financial statements.
Specifically, the Group’s operating segments are as follows:
(1) Wealth Management Segment engages in provision of a full range of financial services and
investment solutions to retail and high net-worth clients. Services provided include brokering and
dealing in securities and futures, investment consulting, wealth management as well as financial
services such as margin financing, security lending, stock pledge, etc.;
(2) Investment Banking Segment engages in provision of sponsoring and underwriting services to
enterprises and government clients for their fund raising activities in equity and debt capital
markets, and also engages in provision financial consulting services for enterprises for their
corporate actions such as merger and assets restructuring services as well as provision of services
related to the National Equities Exchange and Quotations;
(3) Asset Management Segment engages in provision of investment management services on
diversified and comprehensive investment products including asset management, fund
management, and private equity management to individual, corporate and institutional clients;
(4) Trading and Institution Segment engages in provision of stock sales and trading, prime brokerage,
stock lending, and stock research in financial markets across the world to global institutional
clients, and also engages in provision of market-making services for fixed income, currency
and commodity products, futures and options, and derivatives on major exchanges around the
world. At the same time, through investment funds and private equity projects, we enhance the
synergistic advantages of all business divisions of the group, and focus on exploring investment
opportunities with reasonable capital returns, so as to expand customer relations and promote
the overall growth of the group’s business;
(5) Finance Lease Segment engages in provision of innovative financial solutions, including finance
lease, operating lease, factoring, entrustment loans and relevant consulting to individuals,
enterprises and government clients;
(6) Others Segment engages in provision of other comprehensive financial and information services
to institutions clients, including warehouse receipts pledge service, etc.
Segment profit/loss represents the profit earned by/loss measured by each segment without allocation
of income tax expenses. This is the measure reported to CODM for the purposes of resource allocation
and performance assessment.
Share of results of associates and joint ventures are allocated to segment profit/loss while the
corresponding investments in associates and joint ventures are not allocated to each segment.
F-72
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 343
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
5. SEGMENT REPORTING (CONTINUED)
The segment information provided to the CODM for the operating and reportable segments for the
years ended 31 December 2021 and 2020 is as follows:
Operating and Reportable segment
For the year ended 31 December 2021
Wealth Investment Asset Trading and Consolidated
management banking management institution Finance lease Others total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Segment revenue and results
Revenue 17,143,395 5,439,731 3,997,179 15,313,123 6,501,470 9,074 48,403,972
Other income and gains 348,122 276,163 151,681 354,141 2,376,176 5,899,306 9,405,589
Segment revenue 17,491,517 5,715,894 4,148,860 15,667,264 8,877,646 5,908,380 57,809,561
Segment expenses 12,556,507 2,721,431 2,372,493 10,008,524 7,284,804 5,971,892 40,915,651
Segment results 4,935,010 2,994,463 1,776,367 5,658,740 1,592,842 (63,512) 16,893,910
Share of results of associates and
joint ventures – – 712,172 937,717 – – 1,649,889
Segment profit before income tax 4,935,010 2,994,463 2,488,539 6,596,457 1,592,842 (63,512) 18,543,799
Segment assets and liabilities
Segment assets 241,389,287 10,094,708 13,824,798 350,203,976 114,017,446 3,768,589 733,298,804
Investments accounted for using
equity method – – 1,957,895 4,496,525 – – 6,454,420
Deferred tax assets 5,171,925
Group’s total assets 744,925,149
Segment liabilities 192,472,695 9,040,397 7,705,572 250,499,642 106,049,411 81,995 565,849,712
Deferred tax liabilities 1,320,651
Group’s total liabilities 567,170,363
Other segment information (Amounts
included in the measure of segment
profit or loss)
Depreciation and amortization 388,042 155,892 174,906 357,780 416,472 76,249 1,569,341
Capital expenditure 507,641 193,071 29,973 336,422 654,185 77,955 1,799,247
Impairment losses under expected
credit loss model 1,125,388 121,804 177,095 210,187 1,717,445 (245) 3,351,674
Impairment losses on other assets – – – 414,645 85,566 (1,043) 499,168
F-73
344 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
5. SEGMENT REPORTING (CONTINUED)
Operating and Reportable segment (Continued)
For the year ended 31 December 2020
Wealth Investment Asset Trading and Consolidated
management banking management institution Finance lease Others total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Segment revenue and results
Revenue 15,752,048 6,027,749 4,099,914 14,151,968 6,273,204 68,332 46,373,215
Other income and gains 243,686 52,435 101,099 297,123 2,088,463 5,121,179 7,903,985
Segment revenue 15,995,734 6,080,184 4,201,013 14,449,091 8,361,667 5,189,511 54,277,200
Segment expenses 11,623,707 3,101,376 2,455,314 9,510,324 7,142,478 5,229,708 39,062,907
Segment results 4,372,027 2,978,808 1,745,699 4,938,767 1,219,189 (40,197) 15,214,293
Share of results of associates and
joint ventures – – 464,398 117,035 (38,416) – 543,017
Segment profit before income tax 4,372,027 2,978,808 2,210,097 5,055,802 1,180,773 (40,197) 15,757,310
Segment assets and liabilities
Segment assets 231,235,482 22,255,417 16,646,942 304,943,619 107,122,490 3,158,934 685,362,884
Investments accounted for using
equity method – – 1,448,469 2,979,838 – – 4,428,307
Deferred tax assets 4,282,160
Group’s total assets 694,073,351
Segment liabilities 177,785,461 21,494,501 10,855,873 212,465,257 101,198,687 1,449,126 525,248,905
Deferred tax liabilities 698,134
Group’s total liabilities 525,947,039
Other segment information (Amounts
included in the measure of segment
profit or loss)
Depreciation and amortization 307,638 191,568 164,673 244,918 422,911 32,174 1,363,882
Capital expenditure 2,371,770 1,489,630 57,821 1,400,028 2,765,741 9,175 8,094,165
Impairment losses under expected
credit loss model 1,844,320 210,767 79,764 629,161 1,821,454 759 4,586,225
Impairment losses on other assets – – – – 10,050 873 10,923
F-74
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 345
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
5. SEGMENT REPORTING (CONTINUED)
Operating and Reportable segment (Continued)
The Group operates mainly in three principal geographical areas, the mainland China (representing the
location of majority of the income from external customers and non-current assets of the Group), Hong
Kong and Europe (the operation area of Group’s subsidiary). No single customers contribute more than
10% of income to the Group’s income for the years ended 31 December 2021 and 2020.
6. COMMISSION AND FEE INCOME
2021 2020
RMB’000 RMB’000
Securities, futures and options dealing and broking fee income 9,668,840 8,549,407
Underwriting and sponsors fee 4,578,454 4,548,113
Asset management fee income (including fund management
fee income) 3,691,479 3,403,089
Financial advisory and consultancy fee income 651,515 738,003
Others 172,446 148,802
18,762,734 17,387,414
The major business types of commission and fee income from customers are as follows:
(1) Brokerage
The Group provides broking, dealing and handling services for securities, futures and options
contracts. Commission income is recognized at a point in time on the execution date of the
trades at a certain percentage of the transaction value of the trades executed.
(2) Investment Banking
The Group provides placing, underwriting or sub-underwriting services to customers for their fund
raising activities in equity and debt capital markets, and also structured products arrangement
services. Revenue is recognized at a point in time when the relevant placing, underwriting,
sub-underwriting or structured products arrangement activities are completed. The Group also
provides sponsoring services to clients for their fund raising activities and corporate advisory
services to corporate clients for their corporate actions. The Group considers that all the services
promised in a particular contract of being a sponsor or corporate advisor are interdependent and
interrelated and should therefore be accounted for as a single performance obligation.
F-75
346 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
6. COMMISSION AND FEE INCOME (CONTINUED)
(3) Asset management
The Group provides asset management and investment advisory services on diversified and
comprehensive investment products to customers. The customers simultaneously receive and
consumes the benefit provided by the Group, hence the revenue is recognized as a performance
obligation satisfied over time. Asset management fee income is charged at a fixed percentage
per month of the net asset value of the managed accounts under management of the Group.
The Group is also entitled to a performance fee when there is a positive performance for the
relevant performance period and it is recognized at the end of the relevant performance period,
when it is highly probable that a significant reversal in the amount of cumulative revenue
recognized will not occur and when the uncertainty associated with the variable consideration
is subsequently resolved.
As at 31 December 2021, the Group’s most contracts with customers have original expected duration
of less than one year.
7. INTEREST INCOME
2021 2020
RMB’000 RMB’000
Bank interest income 3,212,034 2,805,067
Interest income from advances to customers on margin financing 5,325,547 4,405,044
Interest income from loans and receivable 1,241,489 1,311,985
Interest income from financial assets held under resale agreements 2,203,203 2,922,487
Interest income from debt instruments at fair value through other
comprehensive income and amortised cost 903,940 503,724
Interest income from receivables arising from sale and leaseback
arrangements 2,730,138 2,017,118
Other interest income 9,625 10,527
15,625,976 13,975,952
Finance lease income 3,336,406 3,932,863
F-76
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 347
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
8. INVESTMENT INCOME AND GAINS (NET)
2021 2020
RMB’000 RMB’000
Net realised gains arising from financial assets/liabilities
at fair value through profit or loss 10,308,037 9,745,821
Fair value change of financial instruments at fair value through
profit or loss 290,515 1,270,742
Dividend income from equity instruments at fair value through
other comprehensive income 1,195,069 42,927
Net (losses)/gains arising from debt instruments at fair value through
other comprehensive income (620,788) 14,485
Others (493,977) 3,011
10,678,856 11,076,986
9. OTHER INCOME AND GAINS
2021 2020
RMB’000 RMB’000
Income from commodity trading 5,865,706 5,081,587
Service fee income from finance lease 1,281,696 1,148,831
Government grants 725,782 568,185
Rental income from operating lease 451,145 464,432
Foreign exchange gains 279,938 211,406
Rental income from investment properties 12,583 13,355
Others 788,739 416,189
9,405,589 7,903,985
10. COMMISSION AND FEE EXPENSES
2021 2020
RMB’000 RMB’000
Securities and futures dealing and broking expenses 3,230,145 2,756,572
Commission expenses 414,479 584,737
Services expenses for underwriting, financial advisory and others 126,013 193,957
3,770,637 3,535,266
F-77
348 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
11. INTEREST EXPENSES
2021 2020
RMB’000 RMB’000
Interest expenses for:
– Borrowings and overdrafts 2,523,845 3,300,189
– Deposit taken from banks and other financial institutes 139,355 260,525
– Financial assets sold under repurchase agreements 1,666,352 1,762,502
– Accounts payable to brokerage clients 650,961 422,174
– Advances from China Securities Finance Corporation Ltd.
(“CSFC”) 352,369 244,409
– Bonds payables and short-term financing bills payable 6,344,323 6,337,819
– Lease liabilities 41,531 40,512
– Others 622,883 650,141
12,341,619 13,018,271
12. DEPRECIATION AND AMORTISATION
2021 2020
RMB’000 RMB’000
Depreciation of property and equipment 892,585 669,597
Depreciation for right-of-use assets 482,321 502,920
Depreciation of investment properties 3,348 5,806
Amortisation of other intangible assets 191,087 185,559
1,569,341 1,363,882
13. STAFF COSTS
2021 2020
RMB’000 RMB’000
Staff costs (including directors’ remuneration (Note 71)
Salaries, bonus and allowances 7,629,206 6,660,335
Contributions to annuity plans and retirement schemes (i) 966,816 681,175
Other social welfare 429,228 315,172
9,025,250 7,656,682
(i) The domestic employees of the Group in the PRC participate in a state-managed retirement benefit scheme
operated by the respective local government in the PRC. Apart from the state-managed retirement benefit
scheme, the Group also makes monthly contributions to annuity plans at fixed rates of the employees’ salaries
and bonuses for the period. The Group operates a post-retirement scheme for its qualifying employees in
Hong Kong under the Mandatory Provident Fund Schemes Ordinance. The Group’s contributions to these
post-retirement plans are charged to profit or loss in the period to which they relate.
F-78
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 349
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
13. STAFF COSTS (CONTINUED)
The Group’s subsidiary in Portugal operated a defined benefit scheme. The retirement pension liabilities
are calculated semi-annually, in 31 December and 30 June of each year, for each plan individually, using
the Projected Unit Credit Method, being annually reviewed by qualified independent actuaries of Mercer
(Portugal) Lda. The discount rate used in this calculation is determined with reference to market rates
associated with high-quality corporate bonds, denominated in the currency in which the benefits will be
paid out and with a maturity similar to the expiry date of the plan’s liabilities. As at 31 December 2021, the
actuarial valuations indicate that the fair value of plan assets of the Group’s subsidiary in Portugal represents
a liability financing level of 112.37 per cent (31 December 2020: 100.60 per cent). As at 31 December
2021, the present value of defined benefit obligations and fair value of plan assets in respect of this scheme
amounted to EUR 50,066 thousand equivalent to RMB361,462 thousand (31 December 2020: EUR 52,754
thousand equivalent to RMB423,351 thousand) and EUR 56,260 thousand equivalent to RMB406,180
thousand (31 December 2020: EUR 53,072 thousand equivalent to RMB425,903 thousand) respectively.
Share option award of subsidiaries is disclosed in Note 73.
14. IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL
2021 2020
RMB’000 RMB’000
ECL in respect of:
– Finance lease receivables 1,062,882 1,266,219
– Receivables arising from sale and leaseback arrangements 315,609 231,697
– Advances to customers on margin financing 485,262 1,024,424
– Financial assets held under resale agreements 781,956 851,067
– Other loans and receivables 512,580 846,237
– Debt instruments at amortised cost 10,462 18,732
– Debt instruments at fair value through other comprehensive
income 83,512 259,494
– Loans and advances 1,124 16,410
– Other financial assets and other items 98,287 71,945
3,351,674 4,586,225
F-79
350 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
15. IMPAIRMENT LOSSES ON OTHER ASSETS
2021 2020
RMB’000 RMB’000
Property and equipment 46,616 –
Goodwill 414,645 –
Other assets 37,907 10,923
499,168 10,923
16. OTHER EXPENSES
2021 2020
RMB’000 RMB’000
Cost of commodity trading 5,769,173 5,040,194
Administrative expenses 3,864,814 3,175,602
Taxes and surcharges 284,499 181,777
Others 439,476 494,085
10,357,962 8,891,658
17. INCOME TAX EXPENSE
2021 2020
RMB’000 RMB’000
Current tax 5,003,791 4,511,434
Deferred tax (207,854) (791,353)
4,795,937 3,720,081
Under the Law of the People’s Republic of China on Enterprise Income Tax (the “EIT Law”) and
Implementation Regulation of the EIT Law, the tax rate is 25% from 1 January 2008.
The subsidiaries of the Group operated in Hong Kong are subject to Hong Kong Profits Tax, which is
calculated at 16.5% on the estimated assessable profits arising in Hong Kong.
Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
F-80
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 351
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
17. INCOME TAX EXPENSE (CONTINUED)
A reconciliation of the tax expense applicable to profit before income tax using the applicable rate to
the tax expense at the effective tax rate is as follows:
2021 2020
RMB’000 RMB’000
Profit before income tax 18,543,799 15,757,310
Tax at the statutory tax rate of 25% 4,635,950 3,939,327
Effect of share of results of associates and joint ventures (121,984) (106,658)
Tax effect of expenses not deductible for tax purpose 562,203 915,173
Tax effect of income not taxable for tax purpose (643,617) (658,647)
Over provision in prior years (19,536) (49,169)
Utilisation of tax losses previously not recognised (93,238) (565,362)
Tax effect of tax losses and deductible temporary differences
not recognised 482,810 463,472
Effect of different tax rates of subsidiaries operating
in other jurisdictions (6,651) (218,055)
Tax charge 4,795,937 3,720,081
18. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share attributable to shareholders of the Company
is as follows:
2021 2020
RMB’000 RMB’000
Earnings for the purpose of basic earnings per share:
Profit for the year attributable to shareholders of the Company 12,826,517 10,875,396
Effect of dilutive potential ordinary shares:
Adjustment to the share of profit of subsidiaries based on dilution
of their earnings per share (Note) (151) (3,975)
Earnings for the purpose of diluted earnings per share 12,826,366 10,871,421
Number of shares for basic and diluted earnings per share:
Number of shares in issue (in thousand) 13,064,200 12,022,533
Basic earnings per share (expressed in RMB per share) 0.98 0.90
Diluted earnings per share (expressed in RMB per share) 0.98 0.90
F-81
352 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
18. EARNINGS PER SHARE (CONTINUED)
Note: The calculation of diluted earnings per share is based on the profit for the period attributable to ordinary
equity holders of the parent. The diluted profits of the Group takes into account the potential impact of both
convertible bonds issued by a subsidiary of the Company and various share option or share awards schemes
operated by a subsidiary of the Company, assuming outstanding convertible bonds were fully converted to
ordinary shares and additional shares were issued to relevant employees of each subsidiary on the first day
of the year.
19. PROPERTY AND EQUIPMENT
Furniture,
Land and Leasehold Electronic Transportation fixtures and Construction
buildings improvements equipment equipment equipment in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
As at 1 January 2021 9,070,468 818,821 1,474,675 6,371,799 269,662 357,580 18,363,005
Additions during the year 129,991 113,507 345,232 552,341 31,533 339,341 1,511,945
Disposals during the year (5,138) (84,265) (64,802) (563,167) (21,975) – (739,347)
Transfer in from investment properties 60,631 – – – – – 60,631
Transfer during the year 273,316 49,393 16,404 314 26,144 (365,571) –
Exchange difference (10,518) (9,165) (14,899) (148,823) (7,282) (1,227) (191,914)
As at 31 December 2021 9,518,750 888,291 1,756,610 6,212,464 298,082 330,123 19,004,320
Accumulated depreciation
As at 1 January 2021 689,638 587,565 1,081,584 658,976 205,571 – 3,223,334
Provided for the year 257,021 112,673 186,188 313,889 22,814 – 892,585
Eliminated on disposals (2,486) (56,833) (61,889) (98,158) (20,887) – (240,253)
Transfer in from investment properties 9,016 – – – – – 9,016
Exchange difference (958) (9,637) (13,666) (15,440) (6,180) – (45,881)
As at 31 December 2021 952,231 633,768 1,192,217 859,267 201,318 – 3,838,801
Allowance for impairment losses
As at 1 January 2021 30,382 – – – – – 30,382
Provided for the period – – – 46,616 – – 46,616
Exchange differences – – – (355) – – (355)
As at 31 December 2021 30,382 – – 46,261 – – 76,643
Carrying amount
As at 31 December 2021 8,536,137 254,523 564,393 5,306,936 96,764 330,123 15,088,876
As at 31 December 2020 8,350,448 231,256 393,091 5,712,823 64,091 357,580 15,109,289
F-82
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 353
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
19. PROPERTY AND EQUIPMENT (CONTINUED)
Transportation equipment of the Group includes aircraft held for operating lease businesses, as at
31 December 2021, the cost of aircraft amounts to RMB6,053,876 thousand (2020: RMB6,209,362
thousand), accumulated depreciation amounts to RMB726,263 thousand (2020: RMB525,016 thousand),
allowance for impairment losses amounts to RMB46,261 thousand (2020: RMB0 thousand), and the
carrying amounts of aircraft amounts to RMB5,281,352 thousand (2020: RMB5,684,346 thousand).
As at 31 December 2021 and 31 December 2020, were yet to be obtained for the buildings amounted
to RMB29,460 thousand and RMB30,661 thousand respectively for the relevant land and building
certificates.
20. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Right-of-use assets
Leasehold
land and Electronic Transportation
buildings equipment equipment Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
As at 1 January 2021 2,927,671 759 5,303 2,308 2,936,041
Additions during the year 467,409 664 1,457 304 469,834
Decreases during the year (381,144) (544) (2,073) (511) (384,272)
Exchange difference (21,683) (76) (527) 7 (22,279)
As at 31 December 2021 2,992,253 803 4,160 2,108 2,999,324
Accumulated amortisation
As at 1 January 2021 1,119,942 568 3,039 1,164 1,124,713
Provided for the year 480,419 222 1,298 382 482,321
Decreases during the year (371,500) (514) (2,046) (403) (374,463)
Exchange difference (11,499) (61) (326) – (11,886)
As at 31 December 2021 1,217,362 215 1,965 1,143 1,220,685
Carrying amount
As at 31 December 2021 1,774,891 588 2,195 965 1,778,639
As at 31 December 2020 1,807,729 191 2,264 1,144 1,811,328
F-83
354 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
20. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (CONTINUED)
Lease liabilities
2021/12/31 2020/12/31
RMB’000 RMB’000
Within 1 year 307,759 352,544
1 to 2 years 238,764 254,445
2 to 5 years 249,731 223,004
More than 5 years 250,925 222,420
1,047,179 1,052,413
Amount due for settlement with 12 months shown under
current liabilities 307,759 352,544
Amount due for settlement after 12 months shown under
non-current liabilities 739,420 699,869
The Group leases various land and buildings, electronic equipment, transportation equipment and others
for its operations. Most lease contracts are entered into for terms from 1 year to 40 years. Lease terms
are negotiated on an individual basis and contain a wide range of different terms and conditions. In
determining the lease term and assessing the length of the non-cancellable period, the Group applies
the definition of a contract and determines the period for which the contract is enforceable.
For the year ended 31 December 2021, total cash outflow for leases amounts to RMB568,569 thousand
(2020: RMB578,361 thousand).
For the year ended 31 December 2021, interest expenses for lease liabilities amounts to RMB41,532
thousand (2020: RMB40,512 thousand).
As at 31 December 2021, the lease agreements do not impose any covenants other than the security
interests in the leased assets that are held by the lessor. Leased assets may not be used as security for
borrowing purposes.
As at 31 December 2021, the Group did not enter into any significant lease that is not yet commenced.
F-84
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 355
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
21. INVESTMENT PROPERTIES
2021/12/31 2020/12/31
RMB’000 RMB’000
Cost
At beginning of the year 143,241 210,023
Transfer in during the period 5,138 –
Addition during the year – 46,649
Transfer to property and equipment (60,631) (103,011)
Exchange difference (1,686) (10,420)
At end of the year 86,062 143,241
Accumulated depreciation
At beginning of the year 31,649 33,184
Transfer in during the period 2,486 –
Provided for the year 3,348 5,806
Transfer to property and equipment (9,016) (6,925)
Exchange difference – (416)
At end of the year 28,467 31,649
Carrying amount
At end of the year 57,595 111,592
The fair values of the Group’s investment properties as at 31 December 2021 and 31 December
2020, were RMB308,710 thousand and RMB254,884 thousand respectively. The fair values have been
determined by the directors of the Company by reference to recent market prices for similar properties
in the same or similar locations and conditions. Fair values disclosed above are categorized as Level 3.
F-85
356 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
22. GOODWILL
Cost and carrying values
2021/12/31 2020/12/31
RMB’000 RMB’000
At beginning of the year 3,884,910 4,134,434
Impairment charge (414,645) –
Exchange adjustments (104,952) (249,524)
At end of the year 3,365,313 3,884,910
Particulars regarding impairment testing on goodwill are disclosed in Note 24.
23. OTHER INTANGIBLE ASSETS
Trading Computer Construction
rights software Others in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
As at 1 January 2021 224,226 1,614,796 108,927 27,154 1,975,103
Additions during the year – 170,478 – 5,914 176,392
Disposals during the year – (3,045) (10) (566) (3,621)
Transfer during the year – 2,140 – (2,140) –
Exchange difference (183) (39,365) (1,894) (959) (42,401)
As at 31 December 2021 224,043 1,745,004 107,023 29,403 2,105,473
Accumulated amortisation
As at 1 January 2021 116,601 1,231,502 75,036 – 1,423,139
Provided for the year – 184,896 6,191 – 191,087
Eliminated on disposals – (3,045) (10) – (3,055)
Exchange difference – (35,551) (1,538) – (37,089)
As at 31 December 2021 116,601 1,377,802 79,679 – 1,574,082
Carrying amount
As at 31 December 2021 107,442 367,202 27,344 29,403 531,391
F-86
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 357
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
23. OTHER INTANGIBLE ASSETS (CONTINUED)
Trading Computer Construction
rights software Others in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
As at 1 January 2020 223,740 1,442,703 114,583 22,635 1,803,661
Additions during the year 843 196,217 1,525 6,685 205,270
Disposals during the year – (2,896) (4,681) – (7,577)
Transfer during the year – 2,165 75 (2,240) –
Exchange difference (357) (23,393) (2,575) 74 (26,251)
As at 31 December 2020 224,226 1,614,796 108,927 27,154 1,975,103
Accumulated amortisation
As at 1 January 2020 116,601 1,071,634 69,367 – 1,257,602
Provided for the year – 178,561 6,998 – 185,559
Eliminated on disposals – (2,681) (181) – (2,862)
Exchange difference – (16,012) (1,148) – (17,160)
As at 31 December 2020 116,601 1,231,502 75,036 – 1,423,139
Carrying amount
As at 31 December 2020 107,625 383,294 33,891 27,154 551,964
Trading rights mainly comprise the trading rights in the Shanghai Stock Exchange, the Shenzhen Stock
Exchange, the Hong Kong Exchanges and Clearing Limited and the Hong Kong Futures Exchange Limited
which allow the Group to trade securities and futures contracts on or through these exchanges. The
Group treats trading rights as intangible assets with infinite useful lives.
F-87
358 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
24. IMPAIRMENT TESTING ON GOODWILL AND TRADING RIGHTS WITH
INDEFINITE USEFUL LIVES
Impairment testing on goodwill
For the purpose of impairment testing, goodwill set out in Note 22 has been allocated into six individual
cash generating units (CGUs), including one subsidiary in Shanghai (“Unit A”), one subsidiary in Hong
Kong (“Unit B”), one subsidiary with headquarters in Hong Kong and operation mainly in Shanghai
(“Unit C”), one subsidiary with headquarters in Portugal (“Unit D”), one subsidiary with headquarters
in Japan (“Unit E”) and one subsidiary in Singapore (“Unit F”). The carrying amounts of goodwill as at
31 December 2021 and 31 December 2020 allocated to these units are as follows:
2021/12/31 2020/12/31
RMB’000 RMB’000
Unit A – Haitong Futures Co., Ltd. 5,896 5,896
Unit B – Haitong International Securities Group Limited 641,800 660,671
Unit C – Haitong UT Capital Group Co., Limited 2,047,416 2,107,617
Unit D – Haitong Bank S.A. 544,806 981,646
Unit E – Haitong International Holdings (UK) Limited
(formerly “Japaninvest Group plc”) 120,877 124,431
Unit F – Haitong International Financial Services (Singapore) Pte. Ltd. 4,518 4,649
3,365,313 3,884,910
During the year ended 31 December 2021, management of the Group determined that there were no
impairments of any of its CGUs containing goodwill as the recoverable amounts of Unit A, Unit B, Unit
C, Unit E and Unit F exceed their respective carrying amounts.
During the year, in view of the underperformance of Unit D, the Group recognised an impairment
provision of approximately RMB414,645 thousand against the carrying amount of goodwill in relation
to Unit D for the year of 2021(2020: no impairment loss on the goodwill).
The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are
summarized below:
The recoverable amounts of Unit A, Unit B, Unit C, Unit D, Unit E and Unit F have been determined
on the basis of value in use calculation. That calculation uses cash flow projections based on financial
budgets approved by management and at a discount rate of 4.30% to 18.00% for Unit A, Unit B, Unit
C, Unit D, Unit E and Unit F, as at 31 December 2021. The discount rates used reflect specific risks
relating to the relevant CGUs.
Other key assumptions for the value in use calculations relate to the estimation of cash inflows/outflows
which include budgeted income, gross margin and perpetual growth rate, such estimation is based on
the units’ past performance and management’s expectations for the market development. The growth
rates for the forecast period ranged from -3.18% to 41.58%. The terminal growth rates ranged from
2.00% to 3.20%.
F-88
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 359
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
24. IMPAIRMENT TESTING ON GOODWILL AND TRADING RIGHTS WITH
INDEFINITE USEFUL LIVES (CONTINUED)
Impairment testing on goodwill (Continued)
Management of the Group believes that any reasonably possible change in any of these assumptions
would not cause the aggregate carrying amounts of Unit A, Unit B, Unit C, Unit E or Unit F to exceed
their respective aggregate recoverable amounts.
Impairment testing on trading rights with indefinite useful lives
The trading rights held by the Group are considered by the directors of the Company as having indefinite
useful lives because they are expected to contribute net cash inflows indefinitely. The trading rights
will not be amortised until their useful lives are determined to be finite. Instead, they will be tested for
impairment annually and whenever there is an indication that they may be impaired. The respective
recoverable amounts of the three cash generating units relating to brokerage business whereby
these trading rights are allocated to, using a value in use calculation, exceed the carrying amounts.
Accordingly, there is no impairment of the trading rights as at 31 December 2021 and 2020.
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
2021/12/31 2020/12/31
RMB’000 RMB’000
Cost of unlisted investments in associates and joint ventures 4,082,549 3,384,351
Share of post-acquisition profits and other comprehensive income,
net of dividends received 2,371,871 1,043,956
Total 6,454,420 4,428,307
Details of investments accounted for using equity method:
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2021/12/31 2020/12/31
PRC Equity investment; 50.00% 50.00%
Investment
Shanghai Tong Guan Investment management
Management Limited services
Partnership*
PRC Equity investment 20.00% 20.00%
Liaoning China-Germany Industrial
Equity Investment Fund (Limited
Partnership)
F-89
360 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2021/12/31 2020/12/31
PRC Fund management 27.78% 27.78%
Fullgoal Fund Management and fund trading
Co. Ltd.* distribution
services
PRC Equity investment 35.71% 35.71%
Jilin Modern Agricultural and
Emerging Markets Investment
Fund Limited*
PRC Equity investment 37.06% 37.06%
Xi’an Aerospace and New Energy
Industry Fund*
PRC Equity investment 45.45% 45.49%
Shanghai Cultural Industries
Investment Fund (Limited
Partnership)*
PRC Equity investment 35.33% 35.33%
Shanghai Equity Investment Fund
Limited Partnership*
PRC Equity investment 35.37% 35.37%
Haitong (Jilin) Modern Service
Industry Investment Fund
Limited Partnership*
F-90
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 361
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2021/12/31 2020/12/31
PRC Equity investment 28.63% 28.63%
Haitong Xingtai (Anhui) Emerging
Industry Investment Fund
Limited Partnership*
PRC Equity investment 34.95% 34.95%
Haitong Qidong (Weihai) Equity
Investment Fund Limited
Partnership*
PRC Equity investment 28.18% 28.18%
Guangdong South Media
Integration Fund Limited
Partnership*
PRC Private equity funds 22.46% 22.46%
investment
Haitong (Jilin) Equity Investment
Fund Limited Partnership*
PRC Investment 24.24% 24.24%
management
Xi’an Civil-Military Integration
Satellite Investment Fund Co.,
Ltd*
PRC Equity investment; 19.39% 19.39%
Investment
Jiaxing Haitong Xuchu Equity management
Investment Fund Limited services
Partnership*
F-91
362 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2021/12/31 2020/12/31
PRC Equity investment 20.00% 20.00%
Shanghai Equity Investment Fund
II Limited Partnership*
PRC Equity investment 20.00% 20.00%
Liaoning Haitong New Drivers
Equity Investment Fund (Limited
Partnership)*
PRC Equity investment 20.00% 20.00%
Xuchang Haitong Innovation
Equity Investment Fund (Limited
Partnership)*
PRC Equity investment 21.34% 21.34%
Huzhou Yuntong Equity
Investment Fund (Limited
Partnership)*
PRC Equity investment 20.00% 20.00%
Jilin Haitong Innovation Satellite
Investment Center (Limited
Partnership)*
PRC Equity investment 20.00% 20.00%
Hefei Haitong Huiyin Equity
Investment Partnership (Limited
Partnership)*
F-92
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 363
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2021/12/31 2020/12/31
PRC Equity Investment 40.00% 0.00%
SME Development Fund Haitong
(Hefei) Partnership (Limited
Partnership)*
Fundo Espírito Santo IBERIA Portugal Venture capital 0.00% 45.93%
(Note iv) fund
PRC Equity investment 19.61% 0.00%
Xi’an Aerospace Haitong
Innovative New Materials Equity
Investment Partnership (Limited
Partnership)*
PRC Equity investment 20.00% 0.00%
CCTV Financial Media Industry
Investment Fund (Limited
Partnership)*
PRC Equity investment 49.90% 51.00%
Liaoning Haitong New Energy
Low-carbon Industry Equity
Investment Co., Ltd.*
Notes:
(i) *The English translated name are for identification only.
(ii) All of these associates and joint ventures are unlisted entities without quoted market price available.
(iii) All of these associates and joint ventures are accounted for using the equity method in these consolidated
financial statements.
(iv) Fundo Espírito Santo IBERIA I was registered in Portugal and discontinued operation in May 2021.
F-93
364 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Fullgoal Fund Management Co. Ltd., as a major associate of the Group, is primarily engaged in provision
of fund management and fund trading distribution services, and is accounted for using the equity
method. The Group holds 27.775% of the shares in Fullgoal Fund Management Co. Ltd. The financial
information for the year ended 31 December 2021 is as follows:
Fullgoal Fund Management Co., Ltd.
2021/12/31 2020/12/31
RMB’000 RMB’000
Total assets 12,646,262 8,745,650
Total liabilities 5,597,222 3,530,641
Net assets 7,049,040 5,215,009
Revenue for the year 8,306,072 5,317,245
Profit for the year 2,564,075 1,651,623
Total comprehensive income 2,556,119 1,639,184
Aggregate information of associates and joint ventures that are not individually material:
2021 2020
RMB’000 RMB’000
The Group’s share of gain 937,718 79,008
The Group’s share of other comprehensive income/(expense) 17 (23,353)
The Group’s share of total comprehensive income 937,735 55,655
Aggregate carrying amount of the Group’s interests in these
associates and joint ventures 4,496,525 2,979,838
F-94
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 365
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
26. FINANCE LEASE RECEIVABLES
2021/12/31 2020/12/31
RMB’000 RMB’000
Minimum finance lease receivables
– Within one year 25,533,151 31,181,156
– In the second year 9,925,219 16,998,643
– In the third year 1,871,410 5,451,619
– In the fourth year 396,805 480,912
– In the fifth year 296,806 295,766
– After five years 597,410 501,855
Gross amount of finance lease receivables 38,620,801 54,909,951
Less: Unearned finance lease income (3,584,005) (4,980,779)
Present value of minimum finance lease receivables 35,036,796 49,929,172
Less: Allowance for ECL (1,564,209) (1,517,769)
Carrying amount of finance lease receivables 33,472,587 48,411,403
Present value of minimum finance lease receivables
– Within one year 23,211,519 28,544,638
– In the second year 9,021,983 15,457,681
– In the third year 1,697,408 4,861,631
– In the fourth year 352,818 397,837
– In the fifth year 256,240 249,560
– After five years 496,828 417,825
Total 35,036,796 49,929,172
Analysed as:
Current assets 22,202,398 27,660,127
Non-current assets 11,270,189 20,751,276
Total 33,472,587 48,411,403
F-95
366 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
26. FINANCE LEASE RECEIVABLES (CONTINUED)
The Group entered into finance lease arrangements with leased assets being machinery equipment
for infrastructure, transportation and logistics, etc. Substantially all finance leases of the Group are
denominated in RMB. The terms of finance leases entered into range from one to ten years.
As at 31 December 2021, the Group’s finance lease receivables pledged as collateral for the Group’s
bank borrowings amounted to RMB1,137,119 thousand (as at 31 December 2020: RMB3,588,312
thousand).
The floating interest rates of finance lease receivables were with reference to the benchmark interest
rate of the market. The floating interest rates of finance lease receivables were adjusted periodically
with reference to the benchmark interest rate of the market.
Movement of allowance for ECL
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 707,113 429,307 381,349 1,517,769
Changes in the loss allowance:
– ECL (reversed)/recognised (127,072) 274,539 915,415 1,062,882
– Write-offs – – (643,965) (643,965)
– Transfer between stages (56,189) (206,920) 263,109 –
– Recovery of finance lease receivables
previously written off – – 72,589 72,589
– Other derecognition – – (445,066) (445,066)
As at 31 December 2021 523,852 496,926 543,431 1,564,209
F-96
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 367
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
26. FINANCE LEASE RECEIVABLES (CONTINUED)
Movement of allowance for ECL (Continued)
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 809,239 427,389 186,089 1,422,717
Changes in the loss allowance:
– ECL (reversed)/recognised (22,429) 220,206 1,068,442 1,266,219
– Write-offs – – (499,948) (499,948)
– Transfer between stages (79,697) (218,288) 297,985 –
– Recovery of finance lease receivables
previously written off – – 72,971 72,971
– Other derecognition – – (744,190) (744,190)
As at 31 December 2020 707,113 429,307 381,349 1,517,769
Analysis of present value of minimum finance lease receivables
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 32,415,838 1,647,131 973,827 35,036,796
As at 31 December 2020 46,916,654 2,177,676 834,842 49,929,172
F-97
368 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
27. RECEIVABLES ARISING FROM SALE AND LEASEBACK ARRANGEMENTS
The table below illustrates the gross and net amounts of receivables arising from sale and leaseback
arrangements.
2021/12/31 2020/12/31
RMB’000 RMB’000
– Within one year 26,278,930 16,834,046
– In the second year 18,371,251 11,662,335
– In the third year 10,718,660 6,632,982
– In the fourth year 3,873,796 3,127,211
– In the fifth year 1,991,889 1,009,281
– Over fifth year 158,862 43,031
Gross amount of receivables arising from sale and leaseback
arrangements 61,393,388 39,308,886
Less: Interest adjustment (5,535,329) (3,617,226)
Present value of receivables arising from sale and leaseback
arrangements 55,858,059 35,691,660
Less: Allowance for ECL (770,036) (477,184)
Carrying amount of receivables arising from sale and leaseback
arrangements 55,088,023 35,214,476
Present value of receivables arising from sale and leaseback
arrangements:
– Within one year 23,910,557 15,285,831
– In the second year 16,714,899 10,589,223
– In the third year 9,751,609 6,022,041
– In the fourth year 3,524,290 2,839,184
– In the fifth year 1,812,175 916,313
– Over fifth year 144,529 39,068
Total 55,858,059 35,691,660
Analysed as:
Current assets 23,566,177 15,082,174
Non-current assets 31,521,846 20,132,302
Total 55,088,023 35,214,476
As at 31 December 2021, the Group’s receivables arising from sale and leaseback arrangements pledged
as collateral for the Group’s bank borrowings amounted to RMB8,024,083 thousand (31 December
2020: RMB9,757,835 thousand).
F-98
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 369
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
27. RECEIVABLES ARISING FROM SALE AND LEASEBACK ARRANGEMENTS
(CONTINUED)
Movement of allowance for ECL
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 455,567 11,128 10,489 477,184
Changes in the loss allowance:
– ECL recognised 251,389 31,196 33,024 315,609
– Write-offs – – (17,311) (17,311)
– Transfer between stages (7,239) (350) 7,589 –
– Recovery of receivable arising from
sale and leaseback arrangements
previously written off – – 2,543 2,543
– Other derecognition – – (7,989) (7,989)
As at 31 December 2021 699,717 41,974 28,345 770,036
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 240,109 8,252 1,050 249,411
Changes in the loss allowance:
– ECL recognised 217,916 2,193 11,588 231,697
– Write-offs – – (3,924) (3,924)
– Transfer between stages (2,458) 683 1,775 –
As at 31 December 2020 455,567 11,128 10,489 477,184
F-99
370 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
27. RECEIVABLES ARISING FROM SALE AND LEASEBACK ARRANGEMENTS
(CONTINUED)
Analysis of present value of receivables arising from sale and leaseback arrangements
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 55,618,393 179,113 60,553 55,858,059
As at 31 December 2020 35,612,607 57,604 21,449 35,691,660
28. EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
2021/12/31 2020/12/31
RMB’000 RMB’000
Managed Account – 15,732,412
Other equity investments (Note i) 10,246,871 506,775
10,246,871 16,239,187
Analysed as:
– Listed 434,489 239,733
– Unlisted 9,812,382 15,999,454
10,246,871 16,239,187
Notes:
(i) As at 31 December 2021, equity instruments at fair value through other comprehensive income (“FVTOCI”)
include non-traded shares and shares held by the Group. As the equity instruments are not held for trading
purpose, the Group has designated these investments as equity instruments at FVTOCI.
As a result of the change of investment strategies, the Group disposed certain equity instrument at FVTOCI,
and the corresponding profits of RMB113,094 thousand was reclassified from revaluation reserve to retained
earnings.
(ii) As at 31 December 2021, equity instruments at FVTOCI of RMB2,569,298 thousand (31 December 2020:
Nil) were collateralized for securities lending.
The dividend income from equity instrument at FVTOCI was disclosed in Note 8.
F-100
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 371
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
29. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
2021/12/31 2020/12/31
RMB’000 RMB’000
Unlisted debt securities 10,531,176 7,903,687
Listed debt securities 26,521,769 5,204,476
37,052,945 13,108,163
Analysed for reporting purpose as:
Current assets 4,002,056 1,234,515
Non-current assets 33,050,889 11,873,648
37,052,945 13,108,163
ECL 259,658 747,756
As at 31 December 2021, debt instruments at fair value through other comprehensive income
of RMB27,051 million (31 December 2020: RMB5,670 million) were collateralized for repurchase
agreements and securities lending.
Movement of allowance for ECL
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 45,423 99,441 602,892 747,756
Changes in the loss allowance:
– ECL recognised/(reversed) 66,641 48,462 (31,591) 83,512
– Transfer between stages (11,100) 11,100 – –
– Other derecognition – – (600,550) (600,550)
– Exchange difference and others (575) – 29,515 28,940
As at 31 December 2021 100,389 159,003 266 259,658
F-101
372 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
29. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME (CONTINUED)
Movement of allowance for ECL (Continued)
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 9,053 444 477,389 486,886
Changes in the loss allowance:
– ECL recognised 40,830 99,404 119,260 259,494
– Transfer between stages 407 (407) – –
– Exchange difference and others (4,867) – 6,243 1,376
As at 31 December 2020 45,423 99,441 602,892 747,756
Gross carrying amount
Lifetime ECL Lifetime ECL
(not credit- (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 33,469,181 3,436,585 38,434 36,944,200
As at 31 December 2020 10,194,330 2,048,499 1,713,812 13,956,641
F-102
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 373
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
30. DEBT INSTRUMENTS MEASURED AT AMORTISED COST
2021/12/31 2020/12/31
RMB’000 RMB’000
Analysed by type:
Debt instruments 4,745,698 3,852,566
Less: Allowance for ECL (20,489) (89,067)
4,725,209 3,763,499
Analysed for reporting purpose as:
Current assets 1,099,101 1,521,668
Non-current assets 3,626,108 2,241,831
4,725,209 3,763,499
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 11,014 – 78,053 89,067
Changes in the loss allowance:
– ECL (reversed)/recognised 10,462 – – 10,462
– Other derecognition – – (74,070) (74,070)
– Exchange difference and others (987) – (3,983) (4,970)
As at 31 December 2021 20,489 – – 20,489
F-103
374 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
30. DEBT INSTRUMENTS MEASURED AT AMORTISED COST (CONTINUED)
Movement of allowance for ECL (Continued)
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 4,536 – 63,446 67,982
Changes in the loss allowance:
– ECL recognised 6,445 – 12,287 18,732
– Exchange difference and others 33 – 2,320 2,353
As at 31 December 2020 11,014 – 78,053 89,067
Gross carrying amount:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 4,745,698 – – 4,745,698
As at 31 December 2020 3,633,747 – 218,819 3,852,566
As at 31 December 2021, debt instruments measured at amortised cost of RMB2,565 million were
collateralized for repurchase arrangements and refinancing with Bank of Portugal.
F-104
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 375
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
31. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2021/12/31 2020/12/31
RMB’000 RMB’000
Debt securities 117,085,317 110,363,693
Equity securities 34,954,924 31,241,195
Funds 48,625,818 53,200,173
Others 19,743,690 25,591,443
220,409,749 220,396,504
Analysed for reporting purpose as:
Current assets 195,277,554 194,251,416
Non-current assets 25,132,195 26,145,088
220,409,749 220,396,504
Notes:
(i) As at 31 December 2021, financial assets at fair value through profit or loss of RMB62,710 million (31
December 2020: RMB58,298 million) were collateralized for repurchase arrangements, refinancing, securities
lending and derivatives compensation contracts, including restricted securities amounted to RMB1,729 million
(31 December 2020: RMB1,704 million).
(ii) The restricted financial assets at fair value through profit or loss with a legally enforceable restriction that
prevents the Group to dispose of within a specified period amounted to approximately RMB9,045 million
as at 31 December 2021 (31 December 2020: RMB4,453 million). The fair value of these financial assets
has considered the relevant features such including selling restrictions.
(iii) For financial assets in connection with structured products with remaining maturities over one year, they
are classified as non-current assets as they are not expected to be settled within one year.
F-105
376 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS
2021/12/31 2020/12/31
RMB’000 RMB’000
Analysed by collateral type:
Stock (Note) 31,968,603 34,486,174
Bonds 9,584,043 25,274,706
Less: Allowance for ECL (1,791,629) (1,795,486)
39,761,017 57,965,394
Analysed by market:
Stock Exchange 37,044,102 42,053,943
Inter-bank market 4,508,544 17,706,937
Less: Allowance for ECL (1,791,629) (1,795,486)
39,761,017 57,965,394
Analysed for reporting purpose as:
Current assets 39,185,614 55,769,601
Non-current assets 575,403 2,195,793
39,761,017 57,965,394
Note: The financial assets (pledged by stock) held under resale agreements are those resale agreements which
qualified investors entered into with the Group with a commitment to purchasing the specified securities
at a future date with an agreed price. As at 31 December 2021, for the Group, the gross carrying amount
of these agreements within one year was RMB31,392,851 thousand (31 December 2020: RMB32,287,677
thousand), the gross carrying amount of these agreements over one year was RMB575,752 thousand (31
December 2020: RMB2,198,497 thousand);
As at 31 December 2021, the fair value of the collateral was RMB121,478,644 thousand (31 December
2020: RMB132,197,247 thousand).
F-106
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 377
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS (CONTINUED)
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 9,693 7,881 1,777,912 1,795,486
Changes in the loss allowance:
– ECL(reversed)/recognised (48) (3,072) 785,076 781,956
– Write-offs – – (646,387) (646,387)
– Transfer between stages 4,266 (3,629) (637) –
– Other derecognition – – (139,420) (139,420)
– Exchange difference and others (6) – – (6)
As at 31 December 2021 13,905 1,180 1,776,544 1,791,629
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 36,085 50,526 844,517 931,128
Changes in the loss allowance:
– ECL(reversed)/recognised (44,894) (6,549) 902,510 851,067
– Transfer between stages 18,689 (36,096) 17,407 –
– Exchange difference and others (187) – 13,478 13,291
As at 31 December 2020 9,693 7,881 1,777,912 1,795,486
F-107
378 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS (CONTINUED)
Gross carrying amount
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 37,068,437 214,814 4,269,395 41,552,646
As at 31 December 2020 51,446,027 1,801,368 6,513,485 59,760,880
33. OTHER LOANS AND RECEIVABLES
2021/12/31 2020/12/31
RMB’000 RMB’000
Factoring receivable 6,030,532 7,480,392
Entrusted loans and others 720,224 798,422
Other loans and receivables 8,926,484 12,720,031
Gross carrying amount 15,677,240 20,998,845
Less: Allowance for ECL (738,575) (878,838)
14,938,665 20,120,007
Analysed for reporting purpose as:
Current assets 12,544,269 16,884,562
Non-current assets 2,394,396 3,235,445
14,938,665 20,120,007
F-108
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 379
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
33. OTHER LOANS AND RECEIVABLES (CONTINUED)
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 161,119 394,663 323,056 878,838
Changes in the loss allowance:
– ECL (reversed)/recognised (4,691) 65,930 451,341 512,580
– Write-offs – – (52,703) (52,703)
– Transfer between stages (24,813) (210,885) 235,698 –
– Recovery of other loans and
receivables previously
written off – – 1,344 1,344
– Other derecognition – – (592,429) (592,429)
– Exchange difference and others (976) (119) (7,960) (9,055)
As at 31 December 2021 130,639 249,589 358,347 738,575
Movement of allowance for ECL (Continued)
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 207,531 423,588 213,576 844,695
Changes in the loss allowance:
– ECL recognised 23,823 100,462 721,952 846,237
– Write-offs – – (375,192) (375,192)
– Transfer between stages (32,535) (129,387) 161,922 –
– Other derecognition – – (527,489) (527,489)
– Exchange difference and others (37,700) – 128,287 90,587
As at 31 December 2020 161,119 394,663 323,056 878,838
F-109
380 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
33. OTHER LOANS AND RECEIVABLES (CONTINUED)
Gross carrying amount:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 10,575,552 935,291 4,166,397 15,677,240
As at 31 December 2020 17,566,347 1,724,497 1,708,001 20,998,845
34. LOANS AND ADVANCES
2021/12/31 2020/12/31
RMB’000 RMB’000
Loans and advances 4,808,748 3,927,571
Less: Allowance for ECL (96,097) (107,444)
4,712,651 3,820,127
Analysed for reporting purpose as:
Current assets 593,565 1,044,635
Non-current assets 4,119,086 2,775,492
4,712,651 3,820,127
F-110
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 381
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
34. LOANS AND ADVANCES (CONTINUED)
Movement of ECL for loans and advances:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 14,888 59,467 33,089 107,444
Changes in the loss allowance:
– ECL recognised/(reversed) 7,308 (18,205) 12,021 1,124
– Write-offs – – (2,888) (2,888)
– Transfer between stages (2,029) 508 1,521 –
– Exchange difference and others (1,638) (4,033) (3,912) (9,583)
As at 31 December 2021 18,529 37,737 39,831 96,097
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 21,748 46,258 36,768 104,774
Changes in the loss allowance:
– ECL recognised/(reversed) 4,967 12,348 (905) 16,410
– Written-off – – (1,795) (1,795)
– Transfer between stages (10,687) 10,687 – –
– Exchange difference and others (1,140) (9,826) (979) (11,945)
As at 31 December 2020 14,888 59,467 33,089 107,444
F-111
382 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
34. LOANS AND ADVANCES (CONTINUED)
Gross carrying amount:
Lifetime ECL Lifetime
(not credit- ECL (credit–
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 4,116,862 596,883 95,003 4,808,748
As at 31 December 2020 2,599,476 1,164,584 163,511 3,927,571
35. DEFERRED TAXATION
For the purpose of presentation in the Group’s statements of financial position, certain deferred tax
assets and liabilities have been offset. The following is the analysis of the deferred tax balances for
financial reporting purposes:
2021/12/31 2020/12/31
RMB’000 RMB’000
Deferred tax assets 5,171,925 4,282,160
Deferred tax liabilities (1,320,651) (698,134)
3,851,274 3,584,026
F-112
35. DEFERRED TAXATION (CONTINUED)
The following are the major deferred tax (liabilities) assets recognised and movements thereon:
Debt instrument Equity instrument
Financial assets/ at fair value at fair value
liabilities at fair Derivative Accrued through other through other
value through Accelerated financial but not paid comprehensive comprehensive Impairment Tax losses
profit or loss depreciation instruments expenses income income losses and others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 (564,162) (63,861) 26,318 1,134,419 132,168 (89,335) 1,706,871 609,589 2,892,007
(Charge)/credit to profit or loss (295,298) (16,171) 27,664 193,107 – – 838,117 (21,104) 726,315
(Charge)/credit to other comprehensive income – – (198) – 60,646 (71,531) – – (11,083)
Effects of exchange rate and other change – (1,576) 447 (2,588) (5,788) (19,840) 58,880 (52,748) (23,213)
As at 31 December 2020 (859,460) (81,608) 54,231 1,324,938 187,026 (180,706) 2,603,868 535,737 3,584,026
F-113
(Charge)/credit to profit or loss (346,392) 11,774 32,971 33,044 (135,131) – 619,840 (8,253) 207,853
(Charge)/credit to other comprehensive income – – (4,053) – (86,644) 108,150 – – 17,453
Effects of exchange rate and other change – 1,744 (930) 15,631 6,252 39,969 (7,001) (13,723) 41,942
As at 31 December 2021 (1,205,852) (68,090) 82,219 1,373,613 (28,497) (32,587) 3,216,707 513,761 3,851,274
At the end of the reporting period, no deferred tax liabilities have been recognised in respect of the temporary differences associated with
undistributed earnings of overseas subsidiaries because the Group is in a position to control the timing of the reversal of the temporary
differences and it is probable that such differences will not reverse in the foreseeable future.
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
383
384 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
36. DEPOSITS WITH EXCHANGES
2021/12/31 2020/12/31
RMB’000 RMB’000
Deposits with stock exchanges
– Shanghai Stock Exchange 1,083,784 917,712
– Shenzhen Stock Exchange 196,785 233,073
– National Equities Exchange and Quotations 3,183 2,371
– Stock Exchange of Hong Kong Limited 1,788 1,840
Subtotal 1,285,540 1,154,996
Deposits with futures and commodity exchanges
– Shanghai Futures Exchange 2,909,388 2,609,817
– Dalian Commodity Exchange 2,241,738 1,664,494
– Zhengzhou Commodity Exchange 1,083,011 639,046
– China Financial Futures Exchange 8,715,967 8,744,857
– Shanghai Gold Exchange 15,694 11,968
– HKFE Clearing Corporation Limited 5,430 25,186
– The Chinese Gold & Silver Exchange Society – 409
– Collateral deposits placed with overseas stock exchange and
brokers 594,660 1,073,338
Subtotal 15,565,888 14,769,115
Trading rights and other deposits
– Guarantee fund paid to Shanghai Stock Exchange 40,792 29,497
– Guarantee fund paid to Shenzhen Stock Exchange 49,113 36,137
– Deposit with CSFC 440,150 1,142,874
– Deposit with Shanghai Clearing House 117,659 83,472
– Guarantee fund paid to the Stock Exchange of Hong Kong
Options Clearing House Ltd. 4,241 3,679
– Guarantee fund paid to Hong Kong Securities Clearing
Company Ltd. 142,223 145,128
– Guarantee fund paid to Securities and Futures Commission – 168
– Others 9,562 9,785
Subtotal 803,740 1,450,740
Total 17,655,168 17,374,851
Analysed for reporting purpose as:
Current assets 17,491,923 17,208,163
Non-current assets 163,245 166,688
17,655,168 17,374,851
F-114
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 385
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
37. BANK BALANCES AND CASH
2021/12/31 2020/12/31
RMB’000 RMB’000
General accounts 51,045,568 32,182,212
Cash held on behalf of clients (Note i) 106,920,251 91,691,751
Less: allowance for impairment losses (14,202) (2,247)
157,951,617 123,871,716
Less: non-current restricted bank deposits (Note ii) (1,503,454) (1,288,296)
156,448,163 122,583,420
Bank balances and cash comprise of cash on hand and deposits which bear interest at the prevailing
market rates.
Notes:
(i) The Group received and held cash deposited by clients in the course of the conduct of the regulated activities.
The Group has recognised the corresponding amount in accounts payable to brokerage clients (Note 50).
The Group did not have a legally enforceable right to offset these payables and clients’ deposits.
(ii) The non-current restricted bank deposits include risk reserves, pledge bank deposits and margin deposits
over one year.
38. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise of the following:
2021/12/31 2020/12/31
RMB’000 RMB’000
Bank balances and cash – general account
(excluding accrued interest) 50,949,331 32,147,773
Less: Restricted bank deposits (i) (2,534,750) (2,199,408)
Deposits with other banks (excluding accrued interest) 226,311 258,634
Deposits with central banks other than legal reserve 3,284,435 3,687,476
Clearing settlement funds – House accounts 5,779,740 3,412,801
57,705,067 37,307,276
(i) The restrictive deposits are special account deposits for risk reserves, margin deposits of notes payable,
aircraft maintenance funds and pledged bank deposits.
F-115
386 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
39. OTHER NON-CURRENT ASSETS
2021/12/31 2020/12/31
RMB’000 RMB’000
Long-term receivables from government cooperation projects 885,385 458,507
Foreclosed assets 250,330 82,915
Repossession of finance lease assets 219,013 179,686
Others 536,630 275,505
1,891,358 996,613
40. ADVANCES TO CUSTOMERS ON MARGIN FINANCING
2021/12/31 2020/12/31
RMB’000 RMB’000
Loans to margin clients (Note) 76,937,089 75,152,605
Less: Allowance for ECL (1,713,685) (2,085,013)
75,223,404 73,067,592
Analysed for reporting purpose as:
Current assets 75,223,404 73,067,592
Note:
The credit facility limits for margin clients are determined by the discounted market value of the collateral securities
accepted by the Group.
The majority of the loans to margin clients, which are secured by the underlying pledged securities, are interest
bearing. The Group maintains a list of approved stocks for margin lending at a specified loan to collateral ratio.
Any excess in the lending ratio will trigger a margin call which the customers have to make up the shortfall.
Loans to margin clients as at 31 December 2021 were secured by the customers’ securities to the Group as collateral
with undiscounted market value of approximately RMB263,615,471 thousand (31 December 2020: RMB255,840,832
thousand).
As at 31 December 2021, cash collateral received from clients for securities lending and margin financing
arrangement, included in the Group’s accounts payable to brokerage clients amounted to approximately
RMB8,073,655 thousand (31 December 2020: RMB8,634,304 thousand).
The directors of the Company are of the opinion that the aging analysis does not give additional value in view of
the nature of the business. As a result, no aging analysis is disclosed. The Group determines the allowance for
impaired debts based on the evaluation of collectability and management’s judgment including the assessment of
change in credit quality, collateral and the past collection history of each client. The concentration of credit risk is
limited due to the customer base being large and unrelated.
F-116
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 387
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
40. ADVANCES TO CUSTOMERS ON MARGIN FINANCING (CONTINUED)
Movements of ECL for advances to customers on margin financing.
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2021 32,760 5,838 2,046,415 2,085,013
Changes in the loss allowance:
– ECL recognised 26,787 2,181 456,294 485,262
– Write-offs – – (832,743) (832,743)
– Transfer between stages (3,830) 3,946 (116) –
– Exchange difference and others (630) (154) (23,063) (23,847)
As at 31 December 2021 55,087 11,811 1,646,787 1,713,685
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 35,652 45,852 1,026,510 1,108,014
Changes in the loss allowance:
– ECL (reversed)/recognised (25,909) 6 1,050,327 1,024,424
– Write-offs – – (49) (49)
– Transfer between stages 24,670 (38,179) 13,509 –
– Exchange difference and others (1,653) (1,841) (43,882) (47,376)
As at 31 December 2020 32,760 5,838 2,046,415 2,085,013
F-117
388 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
40. ADVANCES TO CUSTOMERS ON MARGIN FINANCING (CONTINUED)
Gross carrying amount
Lifetime ECL Lifetime
(not credit- ECL (credit–
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021 73,158,320 1,019,080 2,759,689 76,937,089
As at 31 December 2020 69,521,902 2,188,383 3,442,320 75,152,605
41. ACCOUNTS RECEIVABLE
2021/12/31 2020/12/31
RMB’000 RMB’000
Accounts receivable from:
– Cash clients 1,503,403 1,099,949
– Brokers, dealers and clearing house 7,007,206 5,440,065
– Advisory and financial planning 28,354 25,801
– Asset and fund management 847,026 781,110
– Clients for subscription of new shares in IPO – 473,605
– Others 2,189,133 765,955
11,575,122 8,586,485
Less: Allowance for ECL (203,106) (176,485)
11,372,016 8,410,000
F-118
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 389
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
41. ACCOUNTS RECEIVABLE (CONTINUED)
Aging analysis of accounts receivable from the trade date is as follows:
2021/12/31 2020/12/31
RMB’000 RMB’000
Less than 3 months 9,918,027 7,311,229
4 to 6 months 490,884 335,424
7 to 12 months 432,920 345,184
More than 1 year 530,185 418,163
11,372,016 8,410,000
42. DERIVATIVE INSTRUMENTS
2021/12/31
Contractual
value Assets Liabilities
RMB’000 RMB’000 RMB’000
Derivatives designated in hedge accounting:
Interest rate swaps 2,594,286 11,079 67,973
Foreign exchange swap 2,080,552 – 88,985
Forward contracts 820,273 – 74,157
Derivatives held for trading:
Stock index futures contracts (Note i) 15,488,680 – –
Treasury futures contracts (Note ii) 22,279,016 – –
Commodity futures contracts (Note iii) 11,394,851 – –
Interest rate swap contracts (Note iv) 62,486,693 453,337 382,558
Equity swap 6,551,915 208,790 292,057
Forward contracts 18,835,143 167,665 102,935
Options (Note v) 127,949,347 192,765 325,999
Embedded equity instruments 2,860,711 – 186,354
Foreign exchange swap 2,137,298 51,095 25,093
Credit default swap 422,000 – 2,205
Total 275,900,765 1,084,731 1,548,316
F-119
390 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
42. DERIVATIVE INSTRUMENTS (CONTINUED)
2020/12/31
Contractual
value Assets Liabilities
RMB’000 RMB’000 RMB’000
Derivatives designated in hedge accounting:
Interest rate swaps 3,625,570 – 160,674
Currency forwards 1,945,083 1,209 85,526
Cross currency interest rate swaps 1,335,021 – 113,710
Derivatives held for trading:
Stock index futures contracts (Note i) 10,780,440 – –
Treasury futures contracts (Note ii) 9,242,088 – –
Commodity futures contracts (Note iii) 9,199,719 – –
Interest rate swap contracts (Note iv) 42,049,068 763,615 747,396
Commodity swap 589,920 269,595 275,920
Equity swap 2,726,885 45,153 65,740
Forward contracts 4,675,365 122,212 170,320
Options (Note v) 159,871,789 381,718 859,541
Embedded equity instruments 2,433,998 3,991 175,865
Foreign exchange swap 2,958,985 240,930 13,364
Credit default swap 459,935 – 4,223
Foreign exchange futures 943,686 9,489 –
Total 252,837,552 1,837,912 2,672,279
F-120
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 391
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
42. DERIVATIVE INSTRUMENTS (CONTINUED)
Notes:
(i) Stock index futures contracts
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in
stock index futures (“SIF”) were settled daily and the corresponding payments or receipts were included in
“clearing settlement funds” as at 31 December 2021 and 31 December 2020. Accordingly, the net position
of the SIF contracts in derivative instruments was nil at the end of reporting period. As at 31 December
2021, the contract value of the outstanding stock index futures contracts that the Group held for the
market risk of the securities lent or to be lent to clients is RMB 15,488,680 thousand (31 December 2020:
RMB10,780,440 thousand), recognising net derivative assets of RMB167,825 thousand (31 December 2020:
net derivative assets of RMB109,789 thousand) before settlement.
(ii) Treasury futures contracts
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in
treasury futures (“TF”) contracts were settled daily and the corresponding payments or receipts were included
in “clearing settlement funds” as at 31 December 2021 and 31 December 2020. Accordingly, the net position
of the TF contracts in derivative instruments was nil at the end of reporting period (31 December 2020: nil).
2021/12/31
Contractual
value Fair value
RMB’000 RMB’000
T2203 2,808,181 (30,324)
TF2203 8,386,402 (62,172)
TS2203 11,084,433 (23,127)
Total 22,279,016 (115,623)
Plus: settlements 115,623
Net position of TF contracts –
2020/12/31
Contractual
value Fair value
RMB’000 RMB’000
T2103 6,708,643 (48,860)
TF2103 2,487,265 (12,763)
TS2103 46,180 (1)
Total 9,242,088 (61,624)
Plus: settlements 61,624
Net position of TF contracts –
F-121
392 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
42. DERIVATIVE INSTRUMENTS (CONTINUED)
Notes: (continued)
(iii) Commodity futures contracts
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in
commodity futures were settled daily and the corresponding payments or receipts were included in “clearing
settlement funds”. As at 31 December 2021, the net position of the commodity futures contracts under the
daily mark-to-market and settlement arrangement was nil (31 December 2020: nil).
2021/12/31 2020/12/31
Contractual Contractual
value Fair value value Fair value
RMB’000 RMB’000 RMB’000 RMB’000
Total 11,394,851 (13,426) 9,199,719 3,779
Plus: settlement 13,426 (3,779)
Net position – –
(iv) Interest rate swap contracts
Under the daily mark-to-market and settlement arrangements, any gains or losses of the Group’s position
in interest rate swap (“IRS”) contracts were settled daily in Shanghai Clearing House and the corresponding
payments or receipts were included in “clearing settlement funds” as at 31 December 2021. Accordingly,
the net position of the IRS contracts in derivative instruments was nil at the end of reporting period.
For IRS contracts in mainland China and Hong Kong market not under the daily mark-to-market and
settlement arrangement are presented gross at the end of reporting period.
2021/12/31
Contractual
value Assets Liabilities
RMB’000 RMB’000 RMB’000
IRS – settled in Shanghai Clearing House 62,456,693 73,513 382,558
IRS – non-centralised settlement 30,000 453,337 –
Total 62,486,693 526,850 382,558
Plus: settlements (73,513) –
Net position of IRS contracts 453,337 382,558
F-122
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 393
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
42. DERIVATIVE INSTRUMENTS (CONTINUED)
Notes: (continued)
(iv) Interest rate swap contracts (Continued)
2020/12/31
Contractual
value Assets Liabilities
RMB’000 RMB’000 RMB’000
IRS – settled in Shanghai Clearing House 30,320,000 38,863 –
IRS – non-centralised settlement 11,729,068 763,615 747,396
Total 42,049,068 802,478 747,396
Plus: settlements (38,863) –
Net position of IRS contracts 763,615 747,396
(v) Options
At 31 December 2021, the notional principal amounts of the Group’s options purchased or written in
Mainland China were approximately RMB120,134,799 thousand (31 December 2020: RMB140,600,349
thousand). The notional principal amounts of the Group’s listed options purchased or written outside
Mainland China were approximately RMB7,814,548 thousand (31 December 2020: RMB19,271,440
thousand).
43. OTHER CURRENT ASSETS
2021/12/31 2020/12/31
RMB’000 RMB’000
Prepayments 1,458,367 1,206,333
Dividend receivable 3,042 2,543
Inventories 166,906 268,965
Other receivables (Note i) 5,109,234 2,450,997
6,737,549 3,928,838
Less: Allowance for ECL (Note ii) (495,462) (482,195)
6,242,087 3,446,643
Notes:
(i) The other receivables and prepayments include short-term rental deposits placed with landlords under
operating leases, other prepaid expenses for daily operation and other receivable and prepayments items
such as prepaid taxes.
(ii) Included in the impairment losses of the Group mainly represents a gross receivable of RMB440,894 thousand
from an independent third party. In the opinion of the directors of the Company, the recoverability of the
receivable is remote and a full provision was made in prior year.
F-123
394 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
44. PLACEMENTS TO BANKS AND OTHER FINANCIAL INSTITUTIONS
2021/12/31 2020/12/31
RMB’000 RMB’000
Placements to overseas banks 359,538 26,539
Less: Allowance for ECL (6,610) (3,920)
352,928 22,619
45. CLEARING SETTLEMENT FUNDS
2021/12/31 2020/12/31
RMB’000 RMB’000
Clearing settlement funds held with clearing houses for:
House accounts 5,779,740 3,412,801
Customers 10,985,678 8,439,500
16,765,418 11,852,301
These clearing settlement funds are held by the clearing houses for the Group and can be withdrawn
by the Group at will. These balances carry interest at prevailing market interest rates.
46. DEPOSITS WITH CENTRAL BANKS AND OTHER BANKS
2021/12/31 2020/12/31
RMB’000 RMB’000
Deposits with central banks other than legal reserve 3,284,435 3,687,476
Legal reserve 19,774 28,654
Total 3,304,209 3,716,130
Deposits with other banks 226,343 258,666
Less: Allowance for ECL (6) (2)
Total 226,337 258,664
3,530,546 3,974,794
Deposits with central banks other than legal reserve is repayable on demand. Legal reserve deposits
are non-interesting bearing.
F-124
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 395
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
47. BORROWINGS
2021/12/31 2020/12/31
RMB’000 RMB’000
Short-term borrowings:
Secured borrowings (Note) 1,906,267 5,722,206
Unsecured borrowings 27,668,766 37,645,348
29,575,033 43,367,554
Long-term borrowing:
Secured borrowings (Note) 17,576,036 20,053,005
Unsecured borrowings 32,002,992 29,309,998
49,579,028 49,363,003
Total 79,154,061 92,730,557
Current liabilities:
Short-term borrowings 29,575,033 43,367,554
Long-term borrowings due within one year 18,827,302 15,765,096
48,402,335 59,132,650
Non-current liabilities:
Long-term borrowings 30,751,726 33,597,907
79,154,061 92,730,557
2021/12/31 2020/12/31
RMB’000 RMB’000
Analysis by maturity:
Less than 1 year 48,402,335 59,132,650
1 to 2 years 10,633,261 16,957,781
2 to 5 years 19,987,997 16,050,367
More than 5 years 130,468 589,759
79,154,061 92,730,557
F-125
396 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
47. BORROWINGS (CONTINUED)
Note:
As at 31 December 2021, borrowings of RMB1,333 million (31 December 2020: RMB1,343 million) are secured by
the Building B2 of Greenland Center, No.858, Zhongshan Rd.(S), Huangpu District, Shanghai, the PRC.
As at 31 December 2021, borrowings of RMB759 million (31 December 2020: RMB769 million) are secured by the
Building B3 of Greenland Center, No.888, Zhongshan Rd.(S), Huangpu District, Shanghai, the PRC.
As at 31 December 2021, borrowings of RMB818 million (31 December 2020: RMB2,525 million) are secured by
DaCheng-Haitong China Bond fund No.1 owned by the Group. The fair value of the secured assets is RMB2,613
million (31 December 2020: RMB3,615 million).
As at 31 December 2021, borrowings of RMB6,756 million (31 December 2020: RMB5,647 million) are secured by
the shares of Haitong UT Capital Group Co., Limited and Haitong Bank, S.A. held by the Group.
As at 31 December 2021, bank loans of HKD78 million (RMB64 million) (31 December 2020: HKD949 million
(RMB799 million)) were secured by collaterals (listed shares) acquired against the advances to customers on margin
financing with the consent of the customers. The fair value of the secured collaterals is HKD2,437 million (RMB1,992
million) (31 December 2020: HKD4,934 million (RMB4,153 million)).
As at 31 December 2021, borrowings of RMB9,741 million (31 December 2020: RMB14,687 million) are secured
by finance leases receivables, receivables arising from sale and leaseback arrangements, the shares of subsidiaries,
and aircraft for leasing. As at 31 December 2021, the book value of secured finance lease receivable is RMB1,137
million (31 December 2020: RMB3,588 million), the book value of receivables arising from sale and leaseback
arrangements is RMB8,024 million (31 December 2020: RMB9,758 million), the book value of secured aircraft is
RMB for leasing 4,839 million. (31 December 2020: RMB5,429 million).
48. SHORT-TERM FINANCING BILLS PAYABLES
2021/12/31 2020/12/31
RMB’000 RMB’000
Ultra-short-term bonds 6,076,732 5,026,428
Medium-term notes 5,593,378 5,235,973
Short-term income certification 2,178,256 8,911,524
Short-term bonds – 5,531,940
Short-term corporate bonds 11,138,322 1,012,658
24,986,688 25,718,523
F-126
48. SHORT-TERM FINANCING BILLS PAYABLES (CONTINUED)
Opening Ending
Issue Entity Type Currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Securities Co., Ltd Short-term corporate bonds RMB 28/01/2021 19/12/2021 3.10% – 6,165,618 6,165,618 –
Haitong Securities Co., Ltd Short-term corporate bonds RMB 29/07/2021 29/07/2022 2.72% – 5,058,126 – 5,058,126
Haitong Securities Co., Ltd Short-term corporate bonds RMB 05/06/2020 02/03/2021 2.20% 1,012,658 3,616 1,016,274 –
Haitong Securities Co., Ltd Short-term corporate bonds RMB 12/07/2021 16/06/2022 2.82% – 6,080,196 – 6,080,196
Haitong Securities Co., Ltd Short-term bonds RMB 15/10/2020 13/01/2021 2.88% 5,030,773 4,734 5,035,507 –
Haitong Securities Co., Ltd Short-term income RMB 04/01/2021 02/01/2023 1.00%-8.18% 8,911,523 16,971,006 23,704,273 2,178,256
certification
Haitong Unitrust International Financial Ultra-short-term bonds RMB 16/07/2020 15/01/2021 1.73% 1,007,865 664 1,008,529 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 06/08/2020 29/01/2021 1.85% 1,007,362 1,419 1,008,781 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 27/08/2020 22/01/2021 1.85% 503,141 532 503,673 –
Leasing Co., Ltd
F-127
Haitong Unitrust International Financial Ultra-short-term bonds RMB 18/09/2020 26/05/2021 2.40% 503,145 4,767 507,912 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 29/10/2020 05/02/2021 1.95% 1,003,163 1,870 1,005,033 –
Leasing Co., Ltd
Haitong Unitrust International Financial Short-term RMB 27/11/2020 27/11/2021 4.17% 501,167 18,851 520,018 –
Leasing Co., Ltd Corporate bonds
Haitong Unitrust International Financial Ultra-short-term bonds RMB 03/12/2020 17/04/2021 3.05% 1,001,752 8,858 1,010,610 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 02/02/2021 27/08/2021 3.60% – 510,159 510,159 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 03/02/2021 30/07/2021 3.80% – 509,214 509,214 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 17/03/2021 13/08/2021 3.20% – 506,532 506,532 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 22/04/2021 15/10/2021 3.25% – 1,015,671 1,015,671 –
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
397
398
48. SHORT-TERM FINANCING BILLS PAYABLES (CONTINUED)
Opening Ending
Issue Entity Type Currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Unitrust International Financial Ultra-short-term bonds RMB 30/04/2021 21/01/2022 3.35% – 1,022,452 – 1,022,452
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 21/05/2021 21/01/2022 3.25% – 1,019,896 – 1,019,896
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 24/05/2021 18/02/2022 3.30% – 509,908 – 509,908
Leasing Co., Ltd
For the year ended 31 December 2021
Haitong Unitrust International Financial Ultra-short-term bonds RMB 08/01/2021 25/05/2021 3.05% – 1,011,448 1,011,448 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 19/01/2021 19/03/2021 2.78% – 502,247 502,247 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 27/01/2021 24/04/2021 3.20% – 1,007,627 1,007,627 –
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
F-128
Haitong Unitrust International Financial Ultra-short-term bonds RMB 06/08/2021 22/04/2022 2.97% – 1,011,492 – 1,011,492
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 23/08/2021 11/03/2022 2.83% – 504,893 – 504,893
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 13/10/2021 25/03/2022 2.85% – 1,005,768 – 1,005,768
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 25/11/2021 15/04/2022 2.85% – 1,002,324 – 1,002,324
Leasing Co., Ltd
Haitong International Securities Group Ltd Medium-term notes USD 18/02/2020 16/02/2021 LIBOR + 0.85% 195,970 – 195,970 –
Haitong International Securities Group Ltd Medium-term notes USD 24/02/2020 22/02/2021 LIBOR + 0.85% 202,476 – 202,476 –
Haitong International Securities Group Ltd Medium-term notes USD 03/03/2020 02/03/2021 LIBOR + 0.85% 293,822 – 293,822 –
Haitong International Securities Group Ltd Medium-term notes HKD 23/04/2020 21/04/2021 2.50% 320,780 – 320,780 –
Haitong International Securities Group Ltd Medium-term notes USD 29/04/2020 28/04/2021 2.75% 332,177 – 332,177 –
Haitong International Securities Group Ltd Medium-term notes HKD 26/05/2020 25/05/2021 2.40% 468,936 – 468,936 –
Haitong International Securities Group Ltd Medium-term notes USD 28/05/2020 27/05/2021 2.30% 971,048 – 971,048 –
Haitong International Securities Group Ltd Medium-term notes USD 07/08/2020 05/02/2021 1.16% 424,297 – 424,297 –
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Haitong International Securities Group Ltd Medium-term notes USD 10/08/2020 09/08/2021 1.45% 245,662 – 245,662 –
48. SHORT-TERM FINANCING BILLS PAYABLES (CONTINUED)
Opening Ending
Issue Entity Type Currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong International Securities Group Ltd Medium-term notes USD 08/09/2020 07/09/2021 0.00% 322,908 – 322,908 –
Haitong International Securities Group Ltd Medium-term notes USD 17/09/2020 16/09/2021 1.18% 653,673 – 653,673 –
Haitong International Securities Group Ltd Medium-term notes USD 09/11/2020 09/08/2021 0.00% 608,191 – 608,191 –
Haitong International Securities Group Ltd Medium-term notes USD 09/11/2020 09/02/2021 1.10% 196,034 – 196,034 –
Haitong International Securities Group Ltd Medium-term notes USD 08/01/2021 08/04/2021 0.90% – 734,863 734,863 –
Haitong International Securities Group Ltd Medium-term notes USD 12/01/2021 13/04/2021 0.90% – 702,930 702,930 –
Haitong International Securities Group Ltd Medium-term notes USD 13/01/2021 15/12/2021 1.20% – 1,289,435 1,289,435 –
Haitong International Securities Group Ltd Medium-term notes USD 22/02/2021 24/05/2021 0.70% – 255,482 255,482 –
Haitong International Securities Group Ltd Medium-term notes USD 25/02/2021 30/11/2021 0.90% – 642,008 642,008 –
Haitong International Securities Group Ltd Medium-term notes USD 25/02/2021 08/12/2021 0.90% – 642,135 642,135 –
Haitong International Securities Group Ltd Medium-term notes HKD 09/03/2021 09/09/2021 0.75% – 312,683 312,683 –
Haitong International Securities Group Ltd Medium-term notes USD 15/03/2021 15/06/2021 0.63% – 402,320 402,320 –
Haitong International Securities Group Ltd Medium-term notes USD 08/04/2021 10/01/2022 0.72% – 320,486 – 320,486
F-129
Haitong International Securities Group Ltd Medium-term notes HKD 16/07/2021 18/01/2022 0.60% – 655,867 – 655,867
Haitong International Securities Group Ltd Medium-term notes HKD 16/07/2021 15/07/2022 0.70% – 207,420 – 207,420
Haitong International Securities Group Ltd Medium-term notes HKD 29/07/2021 28/01/2022 0.60% – 311,477 – 311,477
Haitong International Securities Group Ltd Medium-term notes HKD 03/08/2021 07/02/2022 0.60% – 311,454 – 311,454
Haitong International Securities Group Ltd Medium-term notes HKD 18/08/2021 18/02/2022 0.50% – 655,193 – 655,193
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
399
400
48. SHORT-TERM FINANCING BILLS PAYABLES (CONTINUED)
Opening Ending
Issue Entity Type Currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong International Securities Group Ltd Medium-term notes USD 26/08/2021 25/08/2022 0.58% – 319,295 – 319,295
Haitong International Securities Group Ltd Medium-term notes HKD 13/09/2021 13/12/2021 0.40% – 245,525 245,525 –
Haitong International Securities Group Ltd Medium-term notes HKD 14/09/2021 14/03/2022 0.00% – 246,644 – 246,644
Haitong International Securities Group Ltd Medium-term notes USD 20/09/2021 19/09/2022 0.59% – 638,366 – 638,366
Haitong International Securities Group Ltd Medium-term notes USD 08/12/2021 07/12/2022 0.75% – 636,686 – 636,686
Haitong International Securities Group Ltd Medium-term notes HKD 13/12/2021 13/06/2022 0.65% – 653,938 – 653,938
For the year ended 31 December 2021
Haitong International Securities Group Ltd Medium-term notes USD 16/12/2021 15/12/2022 0.75% – 636,551 – 636,551
Total 25,718,523 56,280,646 57,012,481 24,986,688
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
F-130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Securities Co., Ltd Corporate bonds RMB 2,390,000 25/11/2013 25/11/2023 6.18% 2,399,603 149,445 147,702 2,401,346
Haitong Securities Co., Ltd Corporate bonds RMB 800,000 14/07/2014 14/07/2024 5.85% 821,925 46,800 46,800 821,925
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 18/05/2016 18/05/2021 3.80% 5,118,685 71,315 5,190,000 –
Haitong Securities Co., Ltd Corporate bonds RMB 1,000,000 11/08/2017 11/08/2022 4.80% 1,018,148 48,403 48,000 1,018,551
Haitong Securities Co., Ltd Corporate bonds RMB 5,500,000 22/09/2017 22/09/2027 4.99% 5,568,412 275,415 274,450 5,569,377
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 08/03/2018 08/03/2021 5.15% 3,126,563 27,937 3,154,500 –
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 22/03/2018 22/03/2021 5.14% 3,120,403 33,797 3,154,200 –
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 10/05/2018 10/05/2021 4.70% 3,091,167 49,833 3,141,000 –
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 06/08/2018 06/08/2021 3.98% 3,048,414 70,986 3,119,400 –
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 22/11/2018 22/11/2021 3.88% 3,012,756 103,644 3,116,400 –
Haitong Securities Co., Ltd Corporate bonds USD 300,000 13/12/2018 13/12/2023 4.50% 1,955,817 222,093 264,835 1,913,075
F-131
Haitong Securities Co., Ltd Corporate bonds EUR 230,000 13/12/2018 13/12/2023 Euribor+165bps 1,846,828 82,245 267,571 1,661,502
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 11/04/2019 11/04/2022 3.75% 5,136,130 187,500 187,500 5,136,130
Haitong Securities Co., Ltd Corporate bonds RMB 4,500,000 15/11/2019 15/11/2022 3.52% 4,520,397 158,400 158,400 4,520,397
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 27/02/2020 27/02/2023 3.01% 5,127,061 150,436 150,500 5,126,997
Haitong Securities Co., Ltd Corporate bonds RMB 3,500,000 19/03/2020 19/03/2023 2.99% 3,582,573 104,650 104,650 3,582,573
Haitong Securities Co., Ltd Corporate bonds RMB 5,600,000 30/04/2020 30/04/2023 2.38% 5,689,827 133,280 133,280 5,689,827
Haitong Securities Co., Ltd Corporate bonds RMB 700,000 30/04/2020 30/04/2025 2.88% 713,587 20,160 20,160 713,587
Haitong Securities Co., Ltd Corporate bonds RMB 6,700,000 25/05/2020 25/05/2023 2.70% 6,809,531 180,900 180,900 6,809,531
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
401
402
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Securities Co., Ltd Corporate bonds RMB 6,000,000 11/08/2020 11/08/2023 3.53% 6,082,979 211,800 211,800 6,082,979
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 21/10/2020 23/10/2021 3.50% 5,034,521 141,439 5,175,960 –
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 21/10/2020 21/10/2022 3.82% 5,037,677 191,000 191,000 5,037,677
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 19/11/2020 13/01/2022 3.70% 5,021,795 185,000 – 5,206,795
For the year ended 31 December 2021
Haitong Securities Co., Ltd Corporate bonds RMB 6,000,000 13/01/2021 13/01/2024 3.58% – 6,207,738 – 6,207,738
Haitong Securities Co., Ltd Corporate bonds RMB 5,400,000 08/02/2021 08/02/2024 3.79% – 5,583,353 – 5,583,353
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 23/04/2021 23/04/2024 3.45% – 5,119,568 – 5,119,568
Haitong Securities Co., Ltd Corporate bonds RMB 2,800,000 27/05/2021 27/05/2024 3.35% – 2,856,280 – 2,856,280
Haitong Securities Co., Ltd Corporate bonds RMB 2,100,000 10/06/2021 10/06/2024 3.40% – 2,140,101 – 2,140,101
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
Haitong Securities Co., Ltd Corporate bonds RMB 2,000,000 29/07/2021 29/07/2024 3.14% – 2,026,841 – 2,026,841
F-132
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 20/08/2021 20/08/2024 3.04% – 3,033,482 – 3,033,482
Haitong Securities Co., Ltd Corporate bonds RMB 2,000,000 30/08/2021 30/08/2024 3.10% – 2,021,063 – 2,021,063
Haitong Securities Co., Ltd Corporate bonds RMB 2,000,000 30/08/2021 30/08/2026 3.43% – 2,023,305 – 2,023,305
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 10/11/2021 10/11/2024 3.10% – 5,022,082 – 5,022,082
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 22/11/2021 22/11/2024 3.09% – 5,016,932 – 5,016,932
Haitong Securities Co., Ltd Subordinated notes RMB 2,000,000 17/11/2016 17/11/2021 3.40% 2,008,384 59,616 2,068,000 –
Haitong Securities Co., Ltd Subordinated notes RMB 3,300,000 28/02/2019 28/02/2022 4.09% 3,413,582 134,911 134,970 3,413,523
Haitong Securities Co., Ltd Long-term income RMB 390,882 05/02/2020 to 09/01/2022 to 0.00%-3.70% 482,399 2,499,988 2,586,532 395,855
certificates 31/12/2021 01/01/2024
Haitong Securities Co., Ltd Financial bond RMB 7,000,000 29/08/2019 29/08/2022 3.39% 7,081,267 237,300 237,300 7,081,267
Shanghai Haitong Securities Corporate bonds RMB 1,000,000 04/11/2020 04/11/2025 3.85% 1,006,012 38,500 38,500 1,006,012
Asset management Co., Ltd
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Shanghai Haitong Securities Subordinated notes RMB 1,000,000 04/04/2018 04/04/2023 5.00% 1,045,085 19,141 960,500 103,726
Asset management Co., Ltd
Shanghai Haitong Securities Subordinated notes RMB 1,000,000 31/10/2018 31/10/2021 5.34% 1,009,071 44,329 1,053,400 –
Asset management Co., Ltd
Haitong International Finance Corporate bonds EUR 220,000 18/05/2016 & 17/05/2021 & 1.60% 1,782,342 43,290 1,825,632 –
Holdings 2015 Limited 26/05/2016 26/05/2021
Haitong International Finance Corporate bonds USD 670,000 12/03/2020 11/03/2025 2.11% 4,389,272 2,794,958 2,893,006 4,291,224
Holdings 2015 Limited
Haitong Unitrust International Corporate bonds RMB 800,000 21/09/2018 21/09/2021 5.05% 809,889 29,110 838,999 –
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 400,000 26/10/2018 26/10/2021 4.85% 402,978 15,839 418,817 –
F-133
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 500,000 28/02/2019 28/02/2022 5.20% 520,650 25,929 24,900 521,679
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 500,000 24/07/2019 24/07/2022 4.83% 509,222 24,150 23,168 510,204
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 11/05/2020 11/05/2023 3.50% 1,018,243 35,000 33,270 1,019,973
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 700,000 19/06/2020 19/06/2022 3.95% 711,483 27,650 25,371 713,762
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,200,000 28/07/2020 28/07/2023 4.00% 1,214,347 48,000 45,638 1,216,709
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 10/09/2020 10/09/2022 4.40% 1,008,260 44,000 40,861 1,011,399
Financial Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
403
404
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Unitrust International Corporate bonds RMB 1,000,000 17/09/2020 17/09/2023 4.20% 1,006,516 42,000 39,813 1,008,703
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 800,000 30/10/2020 30/10/2023 4.15% 801,295 33,200 31,697 802,798
Financial Leasing Co., Ltd
For the year ended 31 December 2021
Haitong Unitrust International Corporate bonds RMB 1,000,000 26/04/2021 26/04/2025 4.10% – 1,024,573 – 1,024,573
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 800,000 18/06/2021 18/06/2025 3.85% – 812,964 – 812,964
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 600,000 12/08/2021 12/08/2024 3.90% – 606,340 – 606,340
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
Financial Leasing Co., Ltd
F-134
Haitong Unitrust International Corporate bonds RMB 1,000,000 25/10/2021 25/10/2023 3.80% – 1,001,517 – 1,001,517
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 24/12/2021 24/12/2024 3.70% – 995,925 – 995,925
Financial Leasing Co., Ltd
Unican Limited Overseas private USD 150,000 31/07/2019 31/07/2022 3.80% 990,682 42,009 62,269 970,422
placement bond
Haitong Unitrust International Medium-term notes RMB 600,000 07/06/2016 07/06/2021 4.07% 189,169 3,239 192,408 –
Financial Leasing Co., Ltd
Haitong Unitrust International Medium-term notes RMB 600,000 15/07/2016 15/07/2021 4.10% 295,303 6,385 301,688 –
Financial Leasing Co., Ltd
Haitong Unitrust International Medium-term notes RMB 1,000,000 23/03/2018 23/03/2021 5.77% 1,044,832 12,805 1,057,637 –
Financial Leasing Co., Ltd
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Unitrust International Medium-term notes RMB 800,000 27/04/2018 27/04/2021 5.23% 828,124 13,297 841,421 –
Financial Leasing Co., Ltd
Haitong Unitrust International Medium-term notes RMB 500,000 31/08/2020 31/08/2023 4.20% 504,822 21,000 20,149 505,673
Financial Leasing Co., Ltd
Haitong Unitrust International Medium-term notes RMB 1,000,000 06/11/2020 06/11/2022 3.97% 1,002,953 39,700 38,051 1,004,602
Financial Leasing Co., Ltd
Haitong Unitrust International Medium-term notes RMB 500,000 20/01/2021 20/01/2023 4.00% – 518,052 – 518,052
Financial Leasing Co., Ltd
Haitong UT Brilliant Limited Medium-term notes USD 100,000 03/06/2021 03/06/2024 3.00% – 619,547 18,100 601,447
Haitong Unitrust International Medium-term notes RMB 1,000,000 09/12/2021 09/12/2024 3.70% – 997,363 – 997,363
Financial Leasing Co., Ltd
F-135
Haitong Unitrust International Asset-based notes RMB 950,000 26/12/2018 08/05/2021 5.90% 82,575 1,144 83,719 –
Financial Leasing Co., Ltd
Haitong Unitrust International Asset-based notes RMB 950,000 11/11/2019 19/03/2022 4.57% 174,185 2,961 177,124 22
Financial Leasing Co., Ltd
Haitong Unitrust International Asset-based notes RMB 950,000 25/03/2020 19/11/2022 4.10% 477,518 11,345 370,418 118,445
Financial Leasing Co., Ltd
Haitong Unitrust International Asset-based notes RMB 970,000 25/06/2021 22/11/2021 3.25% – 982,955 982,955 –
Financial Leasing Co., Ltd
Haitong Unitrust International Asset-based notes RMB 950,000 16/08/2021 27/03/2023 3.06%-4.00% – 954,784 587,721 367,063
Financial Leasing Co., Ltd
Haitong Unitrust International Asset-based notes RMB 950,000 18/08/2021 26/08/2022 3.16% 3.50% – 957,361 617,565 339,796
Financial Leasing Co., Ltd
Haitong Unitrust International Asset-based notes RMB 970,000 18/11/2021 17/05/2022 3.25% – 972,226 – 972,226
Financial Leasing Co., Ltd
Haitong Unitrust International Asset-based notes RMB 950,000 29/11/2021 26/05/2023 3.70% 3.95% – 947,283 – 947,283
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financial Leasing Co., Ltd
405
406
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Unitrust International Asset-based special RMB 1,440,000 27/02/2019 18/11/2021 5.00% 174,771 2,426 177,197 –
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 1,490,000 16/04/2019 08/06/2021 4.40% 156,048 2,172 158,220 –
Financial Leasing Co., Ltd plan
For the year ended 31 December 2021
Haitong Unitrust International Asset-based special RMB 950,000 31/05/2019 19/01/2021 4.34% 66,710 157 66,867 –
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 1,440,000 14/06/2019 24/02/2022 4.50% 347,594 6,561 354,046 109
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 08/08/2019 20/04/2021 4.80% 142,963 653 143,616 –
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
Financial Leasing Co., Ltd plan
F-136
Haitong Unitrust International Asset-based special RMB 1,390,000 27/08/2019 27/12/2021 4.45% 345,295 7,719 353,014 –
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 31/10/2019 26/11/2021 4.60% 252,182 4,327 256,509 –
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 926,000 24/12/2019 26/08/2022 4.60% 383,511 9,846 330,587 62,770
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 26/12/2019 26/07/2021 4.60% 244,057 2,171 246,228 –
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 24/03/2020 26/11/2021 3.65% 394,241 5,931 400,172 –
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 15/04/2020 27/02/2023 3.40% 515,085 10,437 394,293 131,229
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 880,000 28/05/2020 26/07/2022 2.84% 3.40% 565,255 10,929 372,646 203,538
Financial Leasing Co., Ltd plan
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Unitrust International Asset-based special RMB 950,000 17/06/2020 27/02/2023 3.60% 3.70% 667,649 16,473 435,355 248,767
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 19/06/2020 26/01/2022 3.80% 595,774 8,997 577,792 26,979
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 190,000 07/04/2020 13/02/2023 5.00% 189,804 9,500 8,806 190,498
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 28/07/2020 26/05/2023 3.85% 4.10% 723,444 19,829 462,598 280,675
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 14/08/2020 26/04/2022 3.68% 3.99% 712,936 14,269 574,145 153,060
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 09/09/2020 26/04/2023 4.00% 4.20% 788,694 20,968 489,422 320,240
F-137
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 22/10/2020 26/06/2023 4.00% 4.30% 768,511 23,877 481,195 311,193
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 24/11/2020 26/07/2022 4.15% 4.30% 947,872 20,382 727,561 240,693
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 09/12/2020 26/07/2023 4.24% 4.30% 942,576 27,262 550,375 419,463
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 02/02/2021 28/08/2023 3.80% 4.55% – 972,744 540,129 432,615
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 25/03/2021 28/08/2023 3.58%-4.50% – 968,932 467,874 501,058
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 31/03/2021 28/11/2022 3.70%-4.40% – 967,351 578,660 388,691
Financial Leasing Co., Ltd plan
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
407
408
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Unitrust International Asset-based special RMB 950,000 29/04/2021 26/09/2023 3.60%-4.50% – 967,117 451,984 515,133
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 31/05/2021 26/01/2023 3.59%-4.35% – 965,726 355,400 610,326
Financial Leasing Co., Ltd plan
For the year ended 31 December 2021
Haitong Unitrust International Asset-based special RMB 950,000 17/06/2021 28/08/2023 3.45%-4.40% – 961,865 374,677 587,188
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 05/08/2021 26/09/2023 3.30%-4.20% – 955,735 361,411 594,324
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 24/09/2021 26/04/2023 3.17%-3.99% – 954,384 – 954,384
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
Financial Leasing Co., Ltd plan
F-138
Haitong Unitrust International Asset-based special RMB 950,000 19/11/2021 28/08/2023 3.50%-3.95% – 947,632 – 947,632
Financial Leasing Co., Ltd plan
Haitong Unitrust International Asset-based special RMB 950,000 08/12/2021 28/08/2023 3.35%-4.00% – 944,485 – 944,485
Financial Leasing Co., Ltd plan
Haitong Unitrust International Private publication RMB 600,000 12/02/2018 12/02/2021 6.35% 633,666 4,280 637,946 –
Financial Leasing Co., Ltd notes
Haitong Unitrust International Private publication RMB 500,000 19/06/2018 19/06/2021 6.50% 517,068 15,048 532,116 –
Financial Leasing Co., Ltd notes
Haitong Unitrust International Private publication RMB 800,000 30/11/2018 30/11/2021 5.20% 802,532 37,953 840,485 –
Financial Leasing Co., Ltd notes
Haitong Unitrust International Private publication RMB 300,000 23/04/2019 23/04/2022 4.65% 309,091 13,950 13,535 309,506
Financial Leasing Co., Ltd notes
Haitong Unitrust International Private publication RMB 1,000,000 31/05/2019 31/05/2022 4.70% 1,025,514 47,000 45,463 1,027,051
Financial Leasing Co., Ltd notes
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
RMB’000 RMB’000 RMB’000 RMB’000
Haitong Unitrust International Private publication RMB 1,400,000 04/12/2019 04/12/2022 4.50% 1,400,590 62,827 60,753 1,402,664
Financial Leasing Co., Ltd notes
Haitong Unitrust International Private publication RMB 1,000,000 04/06/2021 04/06/2023 3.95% – 1,020,318 – 1,020,318
Financial Leasing Co., Ltd notes
Haitong Unitrust International Private publication RMB 1,000,000 11/11/2021 11/11/2024 4.19% – 1,001,267 – 1,001,267
Financial Leasing Co., Ltd notes
Haitong UT MSE Financial Leasing Asset-based special RMB 760,000 29/12/2021 15/08/2023 3.60%-3.95% – 754,450 – 754,450
(Shanghai) Co., Ltd plan
Haitong International Securities Corporate bonds USD 700,000 19/07/2019 19/07/2024 3.38% 4,617,604 31,604 131,894 4,517,314
Group Ltd
F-139
Haitong International Securities Corporate bonds USD 400,000 18/11/2019 18/05/2025 3.13% 2,600,552 18,949 74,280 2,545,221
Group Ltd
Haitong International Securities Corporate bonds USD 400,000 02/07/2020 02/07/2023 2.13% 2,626,435 19,287 75,019 2,570,703
Group Ltd
Haitong International Securities Corporate bonds USD 300,000 20/05/2021 20/05/2026 2.13% – 1,909,960 – 1,909,960
Group Ltd
Haitong International Securities Convertible bonds HKD 3,880,000 25/10/2016 25/10/2021 0.00% 105,529 1,433 106,962 –
Group Ltd
Haitong Banco de Investimento Financial bond BRL 4,367,710 21/05/2018 to 24/05/2021 to 1.43%-12.08% 520,516 127,706 455,097 193,125
do Brasil S.A. 09/12/2021 11/12/2024
Haitong Investment Ireland PLC Medium-term notes EUR 77,352 20/12/2011 to 12/04/2021 to 0.98%-3.98% 58,882 45,880 58,882 45,880
23/07/2018 23/01/2026
Total 147,838,210 76,581,678 60,833,818 163,586,070
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
For the year ended 31 December 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
409
410 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
49. BONDS PAYABLE (CONTINUED)
2021/12/31 2020/12/31
RMB’000 RMB’000
Analysed for reporting purpose as:
Current liabilities 52,513,925 36,233,688
Non-current liabilities 111,072,145 111,604,522
163,586,070 147,838,210
As at 31 December 2021, bonds payable increased RMB15,748 million, with a percentage of 10.65%,
mainly due to the increase in the issuance of long-term debt instruments of the Group.
50. ACCOUNTS PAYABLE TO BROKERAGE CLIENTS
2021/12/31 2020/12/31
RMB’000 RMB’000
Accounts payable to brokerage clients 123,202,200 108,167,568
The majority of the accounts payable balance is repayable on demand except where certain accounts
payable to brokerage clients represent margin deposits received from clients for their trading activities
under normal course of business. Only the excess amounts over the required margin deposits stipulated
are repayable on demand.
Accounts payable mainly include cash held on behalf of clients at the banks and at the clearing houses
by the Group. Interest payable on accounts payable to brokerage clients shall be accrued according to
the prevailing benchmark interest rate.
F-140
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 411
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
51. CUSTOMER ACCOUNTS
2021/12/31 2020/12/31
RMB’000 RMB’000
Demand deposits – corporate 321,006 229,122
Time deposits – corporate 3,833,794 2,399,463
Demand deposits – individual 55 16,913
Time deposits – individual 1,789,636 1,767,890
5,944,491 4,413,388
Analysed for reporting purpose as:
Current liabilities 2,758,837 4,413,388
Non-current liabilities 3,185,654 –
5,944,491 4,413,388
52. CONTRACT LIABILITIES
2021/12/31 2020/12/31
RMB’000 RMB’000
Commodity trading 156,746 130,540
Other – 499
156,746 131,039
F-141
412 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
53. OTHER PAYABLES AND ACCRUALS
2021/12/31 2020/12/31
RMB’000 RMB’000
Payable to employees (Note i) 7,498,187 6,478,181
Other tax payable 722,417 580,016
Dividends payable 7,536 7,536
Risk reserve 821,412 544,016
Client settlement payables 750,543 2,732,401
Pending payable to clearing house 2,037,970 979,097
Commission and fee payables 19,481 19,857
Amounts due to brokers 1,659,651 1,017,337
Notes payable 2,899,881 2,030,280
Short term finance lease guarantee deposits 3,832,682 3,677,978
Others (Note ii) 9,791,241 4,502,742
30,041,001 22,569,441
Analysed for reporting purpose as:
Current liabilities 28,635,826 21,187,155
Non-current liabilities (Note i) 1,405,175 1,382,286
30,041,001 22,569,441
Notes:
(i) The Group sets up a detailed plan for the payment of accrued employees’ bonuses. According to the plan, a
balance of RMB424,063 thousand is expected to be settled after one year (31 December 2020: RMB407,102
thousand) and therefore classified as non-current liabilities.
(ii) Others mainly represent payables received in advance of the Group which are non-interest bearing and are
settled within one year.
F-142
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 413
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
54. PROVISIONS
2021/12/31 2020/12/31
RMB’000 RMB’000
Pending litigation and others 196,697 130,302
External guarantee 7,103 10,782
203,800 141,084
55. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
2021/12/31 2020/12/31
RMB’000 RMB’000
Financial liabilities held for trading 2,382,470 4,412,068
Liabilities arising from consolidation of structured entities 1,828,521 6,002,904
Designated as financial liabilities at fair value through
profit or loss (FVTPL) (Note i)
– Structured products (Note ii) 8,078,933 16,857,901
– Gold option (Note iii) – 203,317
– Income certificates (Note iv) 4,026,293 4,762,111
16,316,217 32,238,301
Analysed for reporting purpose as:
Current liabilities 10,456,105 22,226,074
Non-current liabilities 5,860,112 10,012,227
16,316,217 32,238,301
Notes:
(i) As at 31 December 2021 and 2020, the difference between the fair values of the Group’s financial liabilities
designated at FVTPL and the contractual payables at maturity is not significant. The amounts of changes in
the fair value that are attributable to changes in the Group’s own credit risk are not significant during the
years ended 31 December 2021 and 2020.
F-143
414 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
55. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
(CONTINUED)
Notes: (Continued)
(ii) As at 31 December 2021 and 2020, included in the Group’s financial liabilities designated at FVTPL are
structured notes issued by subsidiaries of the Group which arise from selling structured products generally
in the form of notes or certificates of which pay-outs are linked to the values/returns of certain underlying
investments related to listed equity investments in active markets, listed/unlisted debt instruments, listed/
unlisted investment funds, unlisted financial products and unlisted equity or partnership investments.
The risk of economic exposure on these structured products is primarily mitigated using financial assets at
FVTPL as detailed in Note 31(iii). These structured products are designated as FVTPL as the risks to which
the Group is a contractual party are managed on a fair value basis as part of the Group’s trading portfolio
and the risk is reported to key management personnel on this basis.
(iii) The Group entered into a number of option contracts in relation to fair value of gold bullions. These contracts
as a combination intend to enable the Group to pay a fixed flow despite the volatilities of fair value of gold
bullions. These contracts were designated at FVTPL.
(iv) The Group issued some income certificates which were hybrid contracts containing embedded derivatives
such as securities index. The entire hybrid contracts were designated as at FVTPL upon initial recognition.
56. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
2021/12/31 2020/12/31
RMB’000 RMB’000
Analysed by collateral type:
Stock 876,186 4,028,550
Bonds 80,060,042 45,162,927
Gold 10,975,724 11,371,956
91,911,952 60,563,433
Analysed by market:
Stock exchanges 38,841,695 14,111,154
Inter-bank market 42,094,533 35,080,323
OTC 10,975,724 11,371,956
91,911,952 60,563,433
Analysed for reporting purpose as:
Current liabilities 91,911,952 60,563,433
F-144
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 415
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
56. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS (CONTINUED)
Sales and repurchase agreements are transactions in which the Group sells a security and simultaneously
agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date. Since
the repurchase prices are fixed, the Group is still exposed to substantially all the credit risks and market
risks and rewards of those securities sold. These securities are not derecognised from the financial
statements but regarded as “collateral” for the liabilities because the Group retains substantially all
the risks and rewards of these securities.
The following tables provide a summary of carrying amounts or fair values related to transferred financial
assets of the Group and the associated liabilities:
As at 31 December 2021
Debt
instruments
Financial assets at fair value Debt Financial
at fair value through other instruments assets held
through comprehensive measured at under resale
profit or loss income amortised cost agreements Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Carrying amount of transferred assets 49,477,280 23,966,069 101,712 719,802 25,187,767 99,452,630
Carrying amount of associated liabilities 44,991,712 22,425,310 99,526 569,279 23,826,125 91,911,952
Net position 4,485,568 1,540,759 2,186 150,523 1,361,642 7,540,678
As at 31 December 2020
Debt
instruments
Financial assets at fair value Debt Financial
at fair value through other instruments assets held
through profit comprehensive measured at under resale
or loss income amortised cost agreements Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Carrying amount of transferred assets 43,594,171 2,813,871 – 542,833 26,211,417 73,162,292
Carrying amount of associated liabilities 37,242,967 2,140,514 – 474,107 20,705,845 60,563,433
Net position 6,351,204 673,357 – 68,726 5,505,572 12,598,859
F-145
416 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
57. PLACEMENTS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS
2021/12/31 2020/12/31
RMB’000 RMB’000
Placements from banks 6,649,257 14,069,197
Placements from CSFC 9,015,400 1,000,316
15,664,657 15,069,513
Analysed for reporting purpose as:
Current liabilities 12,723,438 12,059,685
Non-current liabilities 2,941,219 3,009,828
15,664,657 15,069,513
58. DEPOSITS FROM OTHER BANKS
2021/12/31 2020/12/31
RMB’000 RMB’000
Deposits from other banks 72,787 63,104
59. SHARE CAPITAL
Listed A shares Listed H shares Total
Number of Number of Number of
shares Amount shares Amount shares Amount
’000 RMB’000 ’000 RMB’000 ’000 RMB’000
Registered, issued and fully paid at
RMB1.0 per share:
As at 1 January 2021 9,654,631 9,654,631 3,409,569 3,409,569 13,064,200 13,064,200
As at 31 December 2021 9,654,631 9,654,631 3,409,569 3,409,569 13,064,200 13,064,200
As at 31 December 2021, the total share capital of the company is 13,064,200 thousand shares,
of which 1,171,953 thousand shares are subject to disposal restrictions (as at 31 December 2020:
1,562,500 thousand shares).
F-146
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 417
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
60. REVALUATION RESERVE
2021/12/31 2020/12/31
RMB’000 RMB’000
As beginning of the period/year 282,378 114,007
Debt instrument measured at fair value through other
comprehensive income
– Net fair value changes during the year 275,043 (171,676)
– Reclassification adjustment to profit or loss on disposal 73,630 (47,510)
– Reclassification adjustment to profit or loss for ECL 83,512 259,494
– Income tax impact (87,535) (8,368)
Equity instrument measured at fair value through other
comprehensive income
– Net fair value changes during the period (432,146) 286,814
– Transfer to retained earnings (150,792) 30,376
– Income tax impact 143,478 (82,201)
Share of other comprehensive income of associates and
joint ventures (2,193) (34,727)
Actuarial gains/(losses) on defined benefit obligations 39,131 (340)
Fair value gains/(losses) on hedging instrument designated in
cash flow hedges 80,673 (63,491)
As end of the period/year 305,179 282,378
61. RESERVES AND RETAINED EARNINGS
The amounts of the Group’s reserves and the movements therein during the year are presented in the
consolidated statement of changes in equity.
(a) Capital reserve
The balance of capital reserve mainly includes share premium arising from the issuance of new
shares at prices in excess of par value attributable to shareholders of the Company and other
capital reserve arising from equity transactions.
(b) Revaluation reserve
It mainly represents the fair value changes of debt instruments measured at FVTOCI and equity
instruments measured at FVTOCI.
F-147
418 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
61. RESERVES AND RETAINED EARNINGS (CONTINUED)
(c) General reserves
The general reserves comprise statutory reserve, general risk reserve and transaction risk reserve.
Pursuant to the Company Law of the PRC, 10% of the net profit of the Company, as determined
under the PRC accounting regulations and before distribution to shareholders, is required to be
transferred to a statutory reserve until such time when this reserve represents 50% of the share
capital of the Company. The reserve appropriated can be used for loss-covering, expansion of
production scale and capitalisation, in accordance with the Company’s articles of association or
approved by the shareholders in a shareholders’ general meeting.
In accordance with the Financial Rules for Financial Enterprises, the Company is required to
appropriate 10% of net profit derived in accordance with the relevant accounting rules in the
PRC before distribution to shareholders as general risk reserve from retained earnings.
Pursuant to the Securities Law of the PRC, the Company is required to appropriate 10% of the
net profit derived in accordance with the relevant accounting rules in the PRC before distribution
to shareholders as transaction risk reserve from retained earnings and cannot be distributed or
transferred to share capital.
For the year ended 31 December 2021, the Company transferred approximately RMB3,389,054
thousand to the statutory reserve, general risk reserve and transaction risk reserve pursuant to
the above regulatory requirements in the PRC (31 December 2020: RMB2,182,380 thousand).
Each of the Company’s statutory reserve, general risk reserve and transaction risk reserve
amounted to approximately RMB8,693,606 thousand as at 31 December 2021 (31 December
2020: RMB7,663,172 thousand).
The Company’s PRC subsidiaries are also subject to the statutory requirements to appropriate
their earnings to general reserves. The total amount of general reserves and transaction risk
reserve appropriated from the subsidiaries as at 31 December 2021 is RMB1,790,981 thousand
and RMB441,413 thousand (31 December 2020: RMB1,563,024 thousand and RMB371,616
thousand).
(d) Retained earnings
In accordance with the relevant regulations, the distributable profits of the Company is deemed
to be the lower of (i) the retained earnings determined in accordance with PRC GAAP and (ii)
the retained earnings determined in accordance with IFRSs.
F-148
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 419
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
62. PERPETUAL NOTES
2021/12/31 2020/12/31
RMB’000 RMB’000
Perpetual notes issued by UniTrust (Note) 2,364,512 1,523,756
Perpetual notes issued by Haitong Bank 26,937 29,160
2,391,449 1,552,916
Note:
As at 26 February 2021 and 8 September 2021, UniTrust issued renewable corporate bonds with principal amounts
of RMB1,500,000 thousand and RMB530,000 thousand, the value dates were on 1 March 2021 and 8 September
2021.
The above financial instruments have no fixed maturity date and UniTrust has the right to choose to
defer the principal in accordance with the contractual terms.
Unless the compulsory interest payment events mentioned below have occurred, UniTrust has the right
to choose to defer interest payment at each interest payment date without limit on the number of times
the interests deferred which are not considered as a breach of the contract for the issuer.
UniTrust could not defer current interests and all deferred interests when the following compulsory
interest payment events occurred within 12 months before the interest payment date:
to declare and pay dividend to ordinary shareholders; or
to decrease registered capital
As at 30 December 2021, UniTrust issued a renewable trust plan with principal amount of RMB300,000
thousand and value date on 31 December 2021.
The above financial instruments have no fixed maturity date and UniTrust has the right to choose to
defer the principal in accordance with the contractual terms.
F-149
420 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
62. PERPETUAL NOTES (CONTINUED)
Unless the compulsory interest payment events mentioned below have occurred, UniTrust has the right
to choose to defer interest payment at each interest payment date without limit on the number of times
the interests deferred which are not considered as a breach of the contract for the issuer.
UniTrust could not defer current interests and all deferred interests when the following compulsory
interest payment events occurred within 6 months before the interest payment date:
to decrease registered capital or return the capital contribution of shareholders in cash or other
forms or invest in other forms; or
to declare and pay dividend to ordinary shareholders;
On 12 March 2021, UniTrust redeemed the perpetual medium-term note issued at 11 March 2016 with
principal amount of RMB1,200,000 thousand.
On 17 December 2021, UniTrust redeemed the renewable trust plan issued at 24 December 2020 with
principal amount of RMB286,500 thousand.
Based on the terms and conditions mentioned above, the directors of UniTrust are of the view that
the Group has an unconditional right to avoid delivering cash or other financial assets. Accordingly,
the above perpetual note is measured as other equity instrument under IAS 32 Financial Instruments:
Presentation.
During the year ended 31 December 2021, profit attributable to the holders of the perpetual notes of
the Group amounted to RMB64,737 thousand (2020: RMB50,211 thousand), which are determined
with reference to the distribution rates specified in the terms and conditions.
63. LONG-TERM PAYABLES
2021/12/31 2020/12/31
RMB’000 RMB’000
Finance lease guarantee deposits 5,207,591 6,912,745
Deferred income 435,446 592,924
Others 587,307 500,251
6,230,344 8,005,920
Long-term payables are mainly due to the guaranteed fund received by the Group through finance
lease business. These amounts will expire beyond one year upon contract agreement and are classified
as non-current liabilities.
F-150
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 421
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
64. CREDIT COMMITMENTS
As at 31 December 2021 and 2020, off-balance credit commitments can be analysed as follows:
2021/12/31 2020/12/31
RMB’000 RMB’000
Guarantees and standby letters of credit income 963,048 1,145,716
Irrevocable credit commitments 1,824,989 510,162
Guarantees and standby letters of credits are banking operations that may imply out-flow by the Group
only at default condition.
Irrevocable commitments represent contractual agreements to extend credit to the Haitong Bank’s
customers (e.g. unused credit lines). These agreements are, generally, contracted for fixed periods of
time or with other expiration requisites, and usually require the payment of a commission. Substantially,
all credit commitments require that clients maintain certain conditions verified at the time when the
credit was granted.
Notwithstanding the particular characteristics of these financial guarantees and commitments, the
analysis of these operations follows the same basic principles of any other commercial operation,
namely the solvency of the underlying client and business, being that the Haitong Bank requires these
operations to be adequately covered by collaterals when needed.
Once as expected, the majority of these will expire without being used, the referred amounts are not
representative of the future cash-flows needs.
F-151
422 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
65. OPERATING LEASE ARRANGEMENTS
The Group as lessor
At the end of the reporting period, the Group had contracted with tenants for the following future
minimum lease payments:
2021/12/31 2020/12/31
RMB’000 RMB’000
Within one year 503,180 683,013
In the second year 552,931 605,225
In the third year 506,236 586,742
In the fourth year 467,847 520,438
In the fifth year 431,314 476,662
Over five years 1,072,989 981,461
3,534,497 3,853,541
66. CAPITAL COMMITMENTS
2021/12/31 2020/12/31
RMB’000 RMB’000
Capital expenditure in respect of acquisition of property and
equipment:
– Contracted but not provided 2,226,331 3,685,924
67. DIVIDENDS
2021 2020
RMB’000 RMB’000
Dividends recognised as distribution 3,266,050 3,657,976
According to the 2020 Haitong Securities annual general meeting of shareholders on 18 June 2021,
the general meeting of shareholders reviewed and approved the declaration of a 2020 dividend of
RMB2.5 per 10 shares (including tax) to all shareholders, with a total declared amount of RMB3,266
million including tax, paid in cash.
F-152
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 423
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
68. INVESTMENT IN SUBSIDIARIES
Company
2021/12/31 2020/12/31
RMB’000 RMB’000
Unlisted shares, at cost 36,897,561 33,697,561
Principal subsidiaries acquired through establishment or investment
Details of the principal subsidiaries:
Equity interest held by
the Group
Type of legal Place of As at As at Share capital/
entity registered Incorporation/ 31 December 31 December registered and
Name of subsidiary under PRC law establishment 2021 2020 paid-up capital Principal activities
) PRC 51% 51% RMB300,000,000 Fund management
HFT Investment Management Co., Limited liability company
Ltd. * (equity joint venture)
) PRC 67% 67% RMB100,000,000 Fund management
Haitong-Fortis Private Equity Fund Limited liability company
Management Co., Ltd.* (equity joint venture)
) PRC 100% 100% RMB7,500,000,000 Private Equity
Haitong Capital Investment Co. Ltd.* Limited liability company investment
(“HCICL”)* (corporate owned) management
N/A Hong Kong 100% 100% HKD11,179,726,140 Investment holding
Haitong International Holdings
Limited (“HTIH”)*
PRC 67% 67% RMB1,301,500,000 Futures brokerage
Haitong Futures Co., Ltd.* )
Company limited by shares
(listed on NEEQ)”
N/A Bermuda 65% 65% HKD603,778,509 Investment holding
Haitong International Securities Group
Limited (“HISGL”)*
F-153
424 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
68. INVESTMENT IN SUBSIDIARIES (CONTINUED)
Principal subsidiaries acquired through establishment or investment (Continued)
Details of the principal subsidiaries: (Continued)
Equity interest held by
the Group
Type of legal Place of As at As at Share capital/
entity registered Incorporation/ 31 December 31 December registered and
Name of subsidiary under PRC law establishment 2021 2020 paid-up capital Principal activities
Haitong PRC 100% 100% RMB11,500,000,000 Financial products
Innovation Securities Investment ) Limited liability investment, equity
Co. Ltd * company (corporate investment and
owned) securities investment
) PRC 100% 100% RMB2,200,000,000 Securities asset
Shanghai Haitong Securities Asset Limited liability company management
Management Company Limited* (corporate owned)
N/A Hong Kong 100% 100% HKD4,146,162,881 Investment holding
Haitong UT Capital Group Co.,
Limited
) PRC 85% 85% RMB8,235,300,000 Leasing
Haitong UniTrust International Company limited by
Financial Leasing Co., Ltd. shares (listed)
(“UniTrust”)
N/A Portugal 100% 100% EUR 844,769,000 Banking
Haitong Bank S.A. (“Haitong Bank”)
) PRC 100% 100% RMB10,000,000 Real estate development,
Shanghai Weitai Properties Limited liability company property
Management Co., Ltd. (corporate owned) management and
catering
management
) PRC 100% 100% RMB100,000,000 Real estate development,
Shanghai Zechun Investment & Limited liability company industrial investment
Development Co. Ltd. (“Shanghai (corporate owned) and Investment
Zechun”) management
Note:
(i) English translated name are for identification only.
F-154
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 425
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
68. INVESTMENT IN SUBSIDIARIES (CONTINUED)
Principal subsidiaries acquired through establishment or investment (Continued)
Details of non-wholly owned subsidiaries that have material non-controlling interests
The table below shows details of non-wholly-owned subsidiaries of the Group that have material non-
controlling interests:
Proportion of ordinary
shares and voting rights
held by non-controlling Profit allocated to non Accumulated non
Name of Placement of interests controlling interests controlling interests
subsidiary incorporation 31/12/2021 31/12/2020 31/12/2021 31/12/2020 31/12/2021 31/12/2020
RMB’000 RMB’000 RMB’000 RMB’000
HISGL Bermuda 35.11% 35.09% 87,491 571,817 7,786,029 8,200,216
UniTrust PRC 15.00% 15.00% 198,880 160,267 2,356,403 2,193,486
Summarised financial information in respect of HISGL is set out below. The summarised financial
information below represents amounts before intragroup eliminations.
2021/12/31 2020/12/31
RMB’000 RMB’000
Current assets 75,711,318 104,379,783
Non-current assets 10,129,811 18,872,096
Current liabilities 51,509,314 88,808,764
Non-current liabilities 11,826,192 10,610,253
Total equity 22,505,623 23,832,862
2021 2020
RMB’000 RMB’000
Total income 4,384,746 6,928,747
Profit for the year 249,472 1,626,787
Other comprehensive income 18,064 (94,644)
Total comprehensive income for the year 267,536 1,532,143
Net cash inflow from operating activities 12,854,273 2,722,936
Net cash outflow from investing activities (89,686) (73,149)
Net cash outflow from financing activities (10,466,160) (2,594,813)
Net cash inflow 2,298,427 54,974
F-155
426 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
68. INVESTMENT IN SUBSIDIARIES (CONTINUED)
Principal subsidiaries acquired through establishment or investment (Continued)
Details of non-wholly owned subsidiaries that have material non-controlling interests
(Continued)
Summarised financial information in respect of UniTrust is set out below. The summarised financial
information below represents amounts before intragroup eliminations.
2021/12/31 2020/12/31
RMB’000 RMB’000
Current assets 61,867,266 55,862,275
Non-current assets 52,874,044 52,279,196
Current liabilities 57,562,341 48,362,558
Non-current liabilities 39,559,326 43,925,114
Total equity 17,619,643 15,853,799
2021 2020
RMB’000 RMB’000
Total income 8,953,184 8,545,062
Profit for the year 1,412,860 1,115,984
Other comprehensive income 73,782 (147,562)
Total comprehensive income for the year 1,486,642 968,422
Net cash outflow from operating activities (3,751,311) (3,401,895)
Net cash outflow from investing activities (339,323) (3,007,953)
Net cash inflow from financing activities 5,516,282 5,928,053
Net cash (outflow)/inflow 1,425,648 (481,795)
F-156
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 427
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
69. INTERESTS IN CONSOLIDATED STRUCTURED ENTITIES
The Group had consolidated certain structured entities including asset management products. For
the asset management products where the Group acts as manager or invested in, the Group assesses
whether the combination of investments it held, if any, together with its remuneration and other
interests creates exposure to variability of returns from the activities of the asset management products
that is of such significance that it indicates that the Group is a principal.
The financial impact of these asset management products on the Group’s financial position as at 31
December 2021 and 2020, and the results and cash flows for the years ended 31 December 2021
and 2020, though consolidated, are not individually significant to the Group. Therefore, the financial
information of these consolidated structured entities is not disclosed individually.
Interests in all consolidated structured entities directly held by the Group amounted to fair value of
RMB30,119,941 thousand and RMB27,879,408 thousand at 31 December 2021 and 31 December 2020,
respectively. It contains the interests in the subordinated tranche of those structured products held by
the Group. The Group provides credit enhancement to the senior tranche investors by holding such
subordinated tranche interests. As at 31 December 2021 and 31 December 2020, the fair value of the
Group’s interests in the subordinated tranche of those structured products is RMB370,590 thousand
and RMB296,544 thousand respectively.
70. INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES
Except for the structured entities the Group has consolidated as detailed in Note 69, in the opinion of
the directors of the Company, the variable returns the Group exposed to over the structured entities
that the Group acts as manager are not significant or does not have power over them. Therefore, the
Group did not consolidate these structured entities.
The carrying amount of unconsolidated structured entities in which the Group acted as investment
manager and held financial interests and its maximum exposure to loss in relation to those interests
amounted to RMB13,448,955 thousand and RMB18,234,797 thousand as at 31 December 2021 and
2020, respectively. Total management income from all structured entities in which the Group acted as
investment manager is RMB3,139,995 thousand and RMB3,013,553 thousand respectively.
In addition to those interests in unconsolidated structured entities managed by the Group as disclosed
above, the Group also has interests in unconsolidated structured entities in which the Group did not
act as investment manager. The total maximum exposure to loss in relation to the Group’s interests in
structured products is close to their respective carrying amounts.
F-157
428 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS
The emoluments of the Directors and Supervisors of the Company paid/payable by the Group for the
years ended 31 December 2021 and 2020 are set out below:
For the year ended 31 December 2021
Employer’s
contribution
to pension
Salary schemes
Director and annuity
Name fee commission Bonuses(a) plans Total(b)
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive Directors:
Zhou Jie1 – 490 1,325 – 1,815
Li Jun2 – 230 – – 230
Qu Qiuping3 – 690 1,380 – 2,070
Ren Peng4 – 828 1,242 – 2,070
Independent Non-executive
Directors:
Zhang Ming5 290 – – – 290
Lin Jiali6 200 – – – 200
Zhu Hongchao7 280 – – – 280
Zhou Yu8 290 – – – 290
Non-executive Directors
and Supervisors:
Tu Xuanxuan9 – – – – –
Zhou Donghui10 – – – – –
Yu Liping11 – – – – –
Xu Jianguo12 – – – – –
Zhao Yonggang13 – 257 193 – 450
Wu Hongwei14 – 184 707 – 891
Shi Xu15 – 665 2,072 – 2,737
Wu Xiangyang16 – 430 1,416 – 1,846
Ruan Feng17 – – – – –
Li Zhenghao18 – – – – –
Cao Yijian19 – – – – –
Dong Xiaochun20 – – – – –
Dai Li21 – – – – –
1,060 3,774 8,335 – 13,169
F-158
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 429
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (CONTINUED)
For the year ended 31 December 2020
Employer’s
contribution
to pension
schemes
Director Salary and annuity
Name fee commission Bonuses(a) plans Total(b)
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive Directors:
Zhou Jie1 – 456 754 – 1,210
Qu Qiuping3 – 920 1,490 – 2,410
Ren Peng4 – 828 1,341 – 2,169
Independent Non-executive
Directors:
Zhang Ming5 280 – – – 280
Lin Jiali6 200 – – – 200
Zhu Hongchao7 250 – – – 250
Zhou Yu8 260 – – – 260
Non-executive Directors
and Supervisors:
Tu Xuanxuan9 – – – – –
Zhou Donghui10 – – – – –
Yu Liping11 – – – – –
Xu Jianguo12 – – – – –
Chen Bin22 – – – – –
Wu Hongwei14 – 411 624 – 1,035
Shi Xu15 – 658 1,618 – 2,276
Wu Xiangyang16 – 408 1,077 – 1,485
Ruan Feng17 – – – – –
Li Zhenghao18 – – – – –
Cao Yijian19 – – – – –
Dong Xiaochun20 – – – – –
Dai Li21 – – – – –
Xu Renzhong23 – – – – –
Zheng Xiaoyun24 – – – – –
Feng Huang25 – – – – –
990 3,681 6,904 – 11,575
F-159
430 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (CONTINUED)
For the year ended 31 December 2020 (Continued)
Notes
(a) The bonuses are discretionary and are determined by reference to the Group’s and the individuals’
performance.
(b) The Company did not operate any share option scheme during the reporting periods. Details of the
subsidiary’s share option scheme are disclosed in note 71.
1 Mr. Zhou Jie was appointed as the Executive Director in September 2016, and the Chairman in October
2016. Mr. Zhou Jie whose emoluments disclosed above include those for service rendered by them as the
Executive Director.
2 Mr. Li Jun was appointed as the Executive Director of the Company in September 2021, and the General
Manager in October 2021. Mr. Li Jun whose emoluments disclosed above include those for service rendered
by them as the Executive Director.
3 Mr. Qu Qiuping was appointed as the General Manager and Executive Director of the Company in June
2014. Mr. Qu Qiuping whose emoluments disclosed above include those for service rendered by them as
the Executive Director. Mr. Qu Qiuping resigned from the position of the General Manager and Executive
Director of the Company in September 2021.
4 Mr. Ren Peng was appointed as the Executive Director of the Company in June 2019 and was appointed as
the Vice General Manager of the Company in November 1997. Mr. Ren Peng whose emoluments disclosed
above include those for service rendered by them as the Executive Director.
5 Mr. Zhang Ming was appointed as the Independent Non-executive Director of the Company in June 2016.
6 Mr. Lin Jiali was appointed as the Independent Non-executive Director of the Company in April 2017.
7 Mr. Zhu Hongchao was appointed as the Independent Non-executive Director of the Company in June 2019.
8 Mr. Zhou Yu was appointed as the Independent Non-executive Director of the Company in June 2019.
9 Mr. Tu Xuanxuan was appointed as the Non-executive Director of the Company in June 2019.
10 Mr. Zhou Donghui was appointed as the Non-executive Director of the Company in June 2020.
11 Mrs. Yu Liping was appointed as the Non-executive Director of the Company in June 2015.
12 Mr. Xu Jianguo was appointed as the Non-executive Director of the Company in October 2016.
13 Mr. Zhao Yonggang was appointed as the Vice Chairman of the Supervisory Board in June 2021.
14 Mr. Wu Hongwei was appointed as the Vice Chairman of the Supervisory Board in December 2017. Mr. Wu
Hongwei resigned from the position of the Vice Chairman of the Supervisory Board in June 2021.
F-160
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 431
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (CONTINUED)
For the year ended 31 December 2020 (Continued)
Notes: (Continued)
15 Mr. Shi Xu was appointed as the Supervisor of the Company in June 2019.
16 Mr. Wu Xiangyang was appointed as the Supervisor of the Company in June 2019.
17 Mr. Ruan Feng was appointed as the Supervisor of the Company in October 2020.
18 Mr. Li Zhenghao was appointed as the Supervisor of the Company in June 2020.
19 Mr. Cao Yijian was appointed as the Supervisor of the Company in June 2019.
20 Mr. Dong Xiaochun was appointed as the Supervisor of the Company in October 2020.
21 Mrs. Dai Li was appointed as the Supervisor of the Company in June 2019.
22 Mr. Chen Bin was appointed as the Non-executive Director of the Company in December 2014. Mr. Chen
Bin resigned from the position of the Non-executive Director of the Company in March 2020.
23 Mr. Xu Renzhong was appointed as the Supervisor of the Company in June 2019. Mr. Xu Renzhong resigned
from the position of the Supervisor of the Company in March 2020.
24 Mrs. Zheng Xiaoyun was appointed as the Supervisor of the Company in September 2015. Mrs. Zheng
Xiaoyun resigned from the position of the Supervisor of the Company in August 2020.
25 Mr. Feng Huang was appointed as the Supervisor of the Company in December 2014. Mr. Feng Huang
resigned from the position of the Supervisor of the Company in September 2020.
The executive directors’ emoluments shown above were for their services in connection with the
management of the affairs of the Company and the Group.
The independent non-executive directors’ emoluments shown above were for their services as directors
of the Company.
The supervisors’ emoluments shown above were for their services and their employments as supervisors
of the Company.
For the years ended 31 December 2021 and 2020, no directors or supervisors of the Company waived
any emoluments and no emoluments were paid by the Company to any of the directors or supervisors
as an inducement to join or upon joining the Group or as compensation for redundancy.
F-161
432 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
72. HIGHEST PAID INDIVIDUALS
Of the five individuals with the highest emoluments, none of them are directors, supervisors or senior
management. Details of the remuneration of the five highest paid employees during the year ended
2021 and 2020 are as follows:
2021 2020
RMB’000 RMB’000
Salary and commission 9,795 10,789
Bonuses 43,120 57,172
Employer’s contribution to pension schemes/annuity plans 246 296
53,161 68,257
Bonuses are discretionary and are determined by reference to the Group’s and the individuals’
performance. No emoluments have been paid to or receivable by these individuals as an inducement to
join or upon joining the Group or as compensation for loss of office for the years ended 31 December
2021 and 2020.
The emoluments of the highest-paid individuals of the Group fall within the following bands:
2021 2020
Number of Number of
employees employees
Emolument bands
– RMB9,000,001 to RMB9,500,000 1 –
– RMB9,500,001 to RMB10,000,000 1 –
– RMB10,000,001 to RMB10,500,000 1 –
– RMB10,500,001 to RMB11,000,000 – –
– RMB11,000,001 to RMB11,500,000 1 –
– RMB11,500,001 to RMB12,000,000 – –
– RMB12,000,001 to RMB12,500,000 1 2
– RMB12,500,001 to RMB13,000,000 – 1
– RMB13,000,001 to RMB13,500,000 – –
– RMB13,500,001 to RMB14,000,000 – –
– RMB14,000,001 to RMB14,500,000 – –
– RMB14,500,001 to RMB15,000,000 – –
– RMB15,000,001 to RMB15,500,000 – 1
– RMB15,500,001 to RMB16,000,000 – 1
5 5
F-162
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 433
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES
2015 Share option scheme of HISGL
The shareholders of HISGL approved the adoption of a new share option scheme (the “2015 Share
Option Scheme”) on 8 June 2015 (the “Adoption Date”). The 2015 Share Option Scheme was also
approved by the shareholders of HSCL, the holding company of Haitong International Holdings Limited,
the controlling shareholder of HISGL, and Listing Committee of The Stock Exchange of Hong Kong
Limited on 8 June 2015 and 12 June 2015 respectively. A summary of the principal terms of the 2015
Share Option Scheme, as disclosed in accordance with the Listing Rules, is set out as follows:
The 2015 Share Option Scheme was adopted to attract, retain and motivate talented employees to
strive towards long term performance targets set by the Group and to provide them with an incentive
to work better for the interest of the Group. Under the 2015 Share Option Scheme, share options could
be granted to any full time or part-time employee, executive and non-executive (whether independent
or not) directors of the Group, who, in the absolute opinion of the Board, have contributed to HISGL
or the Group.
The maximum number of shares of HISGL (the “Shares”) which may be issued upon exercise of all
options to be granted under the 2015 Share Option Scheme and any other share option schemes shall
not in aggregate exceed 212,924,439 shares, representing approximately 10% of the issued shares of
HISGL as at 30 November 2014, being the date of tentative approval of the 2015 Share Option Scheme
by the management of HISGL.
In respect of the period of 12 months from the Adoption Date and for each of the subsequent periods
of 12 months from the previous anniversary of the Adoption Date (each of those 12-months periods is
hereinafter referred to as a “Scheme Year”), the total number of shares of HISGL which may be issued
upon exercise of the options granted in each Scheme Year shall not exceed 21,292,444 shares (the
“Annual Limit”). HISGL may from time to time seek approval of its shareholders and the approval of
the shareholders of HSCL (so long as HISGL is a subsidiary of HSCL under the Listing Rules) in respective
general meetings to renew the Scheme Limit and/or the Annual Limit such that the total number of
shares of HISGL in respect of which options may be granted by directors of HISGL under the 2015 Share
Option Scheme (i) in respect of the Scheme Limit, shall not exceed 10% of the issued share capital of
HISGL as at the date of approval of the refreshment; and (ii) in respect of the Annual Limit, shall not
exceed 1% of the issued share capital of HISGL as at the date of approval of the refreshment. Options
previously granted under the 2015 Share Option Scheme and any other share option schemes of HISGL
(including those outstanding, cancelled, lapsed or exercised options) will not be counted for the purpose
of calculating such limits as refreshed.
Notwithstanding the aforesaid in previous paragraph, the maximum number of shares which may be
issued upon exercise of all outstanding options granted and yet to be exercised under the 2015 Share
Option Scheme and any other share option schemes of HISGL shall not exceed 30% (or such higher
percentage as may be allowed under the Listing Rules) of the total number of shares in issue from
time to time.
F-163
434 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The maximum number of shares issued and to be issued upon exercise of the options granted to
each participant under the 2015 Share Option Scheme and any other share option schemes of HISGL
(including both exercised and outstanding options) in any 12-month period shall not exceed 1% of
the total number of HISGL’s shares in issue. Any further grant of share options in excess of this limit
is subject to approval by the shareholders of HISGL at a general meeting.
Share options granted to a director, chief executive or substantial shareholders of HISGL, or to any
of their associates, are subject to approval in advance by the independent non-executive directors.
In addition, any share options granted to a substantial shareholder or an independent non-executive
director of HISGL, or to any of their associates, in excess of 0.1% of the total number of shares of HISGL
in issue at the date on which such grant is proposed by the directors or with an aggregate value (based
on the closing price of HISGL’s shares at the date on which such grant is proposed by the directors) in
excess of HK$5 million, within any 12-month period, are subject to shareholders’ approval in advance
at a general meeting of HISGL.
The offer of a grant of share options may be accepted within 28 days from the date of the offer upon
payment of a consideration of HK$1 by the grantee. The exercise period of the share options granted
is determinable by the directors of HISGL and notified by the directors HISGL to each participant as
being the period during which an option may be exercised, and in any event such period of time shall
not exceed a period of 5 years, commencing on the Offer Date and expire on the last day of such
period. The 2015 Share Option Scheme does not stipulate any performance target which needs to be
achieved by the participant who accepts the offer of share options (the “Grantee”) before the share
options can be exercised. In order to sustain a long-term employment relationship between HISGL and
the Grantee(s), grantees must hold their share options for a holding period of not less than 6 months
from the date of acceptance of the offer by the Grantee, before the share options can be exercised.
F-164
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 435
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The exercise price of the share options is determinable by the directors, and shall be at least the highest
of (i) the price equal to 110% of the closing price of HISGL’s shares as stated in the Stock Exchange’s
daily quotations sheet on the offer date; (ii) the average closing price of HISGL’s shares as stated in
the Stock Exchange’s daily quotations sheets for the 5 trading days immediately preceding the offer
date; and (iii) the nominal value of HISGL’s shares. Share options do not confer rights on the holders
to dividends or to vote at shareholders’ meetings.
On 29 May 2020, HISGL granted 10,645,000 share options at the exercise price of HK$1.727 per share
to its directors and employees under the 2015 Share Option Scheme with a total of 10,645,000 share
options being accepted. The exercise period of the share options is from 25 December 2020 to 28 May
2025. All the share options granted have a vesting period of 6 months from the date of acceptance.
The closing price of HISGL’s shares on the date of grant was HK$1.57 per share.
The estimated fair values of the options granted under 2015 Share Option Scheme on the grant date
on 29 May 2020 is approximately HK$3.2 million, which was calculated using the Binomial Option
Pricing model with the key inputs into the model as disclosed below.
2020
Weighted average share price at the date of grant HK$1.57
Initial exercise price HK$1.727
Expected volatility 49.389%
Expected option life 5 years
Risk-free rate 0.520%
Expected dividend yield 11.439%
Early exercise multiples – directors of HISGL 1.69
– employees 1.94
Expected volatility was determined using the historical volatility of HISGL’s share price over the previous
5 years at the grant date.
On 21 July 2021, HISGL granted 10,645,000 share options at the exercise price of HK$2.398 per share
to its directors and employees under the 2015 Share Option Scheme with a total of 9,845,000 share
options being accepted. The exercise period of the share options is from 17 February 2022 to 20 July
2026. All the share options granted have a vesting period of 6 months from the date of acceptance.
The closing price of HISGL’s shares on the date of grant was HK$2.18 per share.
F-165
436 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The estimated fair values of the options granted under 2015 Share Option Scheme on the grant date on
21 July 2021 is approximately HK$3.6 million, which was calculated using the Binomial Option Pricing
model with the key inputs into the model as disclosed below.
2021
Weighted average share price at the date of grant HK$2.18
Initial exercise price HK$2.398
Expected volatility 37.533%
Expected option life 5 years
Risk-free rate 0.495%
Expected dividend yield 7.514%
Early exercise multiples – directors of HISGL 1.68
– employees 1.91
Expected volatility was determined using the historical volatility of HISGL’s share price over the previous
5 years at the grant date.
For the year ended 31 December 2021, the Group has recognised an equity-settled share-based
compensation expense of HK$2,678 thousand equivalent to RMB 2,190 thousand (2020: HK$3,222
thousand, equivalent to RMB 2,712 thousand) for the share options under the 2015 Share Option
Scheme in the consolidated statement of profit or loss.
The following table discloses movements of share options granted to the directors and employees of
the Group.
2021 2020
Weighted Weighted
average Number of average Number of
exercise price options exercise price options
HKD 000 HKD 000
per share per share
At beginning of the year 3.369 62,102 3.728 54,106
Granted and accepted during
the year 2.398 9,845 1.727 10,645
Adjusted during the year (note) – – 3.717 95
Exercise during the year 1.727 (1,750) – –
Forfeited during the year 3.840 (29,646) 3.950 (2,744)
At end of the year 2.860 40,551 3.369 62,102
F-166
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 437
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The exercise prices and exercise periods of the share options outstanding as at respective reporting
dates are as follows:
31 December 2021 Exercise price
Number of options HKD$ per share Exercise period
000 (note)
6,546 5.002 7 June 2018 – 9 November 2022
11,125 2.898 28 May 2019 – 31 October 2023
6,340 2.554 27 December 2019 – 30 May 2024
7,345 1.727 25 December 2020 – 28 May 2025
9,195 2.398 17 February 2022 – 20 July 2026
40,551
31 December 2020 Exercise price
Number of options HKD$ per share Exercise period
000 (note)
12,611 4.635 8 December 2016 – 11 May 2021
11,078 5.002 7 June 2018 – 9 November 2022
17,610 2.898 28 May 2019 – 31 October 2023
10,158 2.554 27 December 2019 – 30 May 2024
10,645 1.727 25 December 2020 – 28 May 2025
62,102
Note: The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, scrip
dividend, or bonus shares, or other similar changes in HISGL’s share capital.
As at 31 December 2021, HISGL had 40,551,041 (2020: 62,102,499) share options outstanding under
the 2015 Share Option Scheme, which represented approximately 0.67% (2020: 1.03%) of HISGL’s
shares in issue as at that date.
The exercise in full of the remaining share options would, under the present capital structure of
HISGL, result in the issue of 40,551,041 (2020: 62,102,499) additional ordinary shares of HISGL and
additional share capital of HK$4,055 thousand equivalent to RMB3,315 thousand (2020: HK$6,210
thousand, equivalent to RMB5,227 thousand) and share premium of HK$111,855 thousand equivalent
to RMB91,453 thousand (2020: HK$203,016 thousand equivalent to RMB170,866 thousand) (before
issue expenses).
F-167
438 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL
On 19 December 2014, the Board adopted a 10-year share award scheme (the “Scheme”) to incentivise
selected employees or directors (“Selected Participants”) for their contributions to the Group and to
attract suitable personnel for further development of the Group.
Pursuant to the Scheme, the ordinary shares of HK$0.1 each in the capital of HISGL will be acquired by
the trustee at the cost of HISGL and will be held in trust for the Selected Participants before vesting.
The total number of shares granted under the Scheme shall be limited to 10% of the total issued share
capital of HISGL as at 19 December 2014 (the “Adoption Date”) or such other percentage as determined
by the Board from time to time.
No award of the shares shall be granted to any single Selected Participant which would result in the
maximum number of awarded shares under the Scheme in the 12-month period up to and including
the date of such grant representing in aggregate over 1% of the issued share capital of HISGL as at
the Adoption Date.
The Board has delegated the power and authority to the Administration Committee to handle
administrative matters of the Scheme but all major decisions in relation to the Scheme shall be made
by the Board unless expressly provided for in the Scheme rules pursuant to the Scheme or the Board
resolves to delegate such power to the Administration Committee.
Pursuant to the Scheme rules, the Administration Committee may, from time to time, at its absolute
discretion and subject to such terms and conditions as it may think fit (including the basis of eligibility
of each Participant) select any participant (excluding any excluded participants as defined under the
Scheme rules) for participation in the Scheme as a Selected Participant and determine the number of
awarded shares, save and except that the selection of a director of HISGL as a Selected Participant, the
terms and conditions of the award to such director and the number of award shares thereunder shall
be approved by the Board upon the recommendation of the Remuneration Committee.
After the selection of the Selected Participant(s) and the determination of the number of awarded shares
by the Board or the Administration Committee, as the case may be, the Administration Committee
shall inform the trustee accordingly. The Administration Committee shall also inform the Selected
Participant(s) by award notice. Provided that the respective Selected Participant(s) has (have) executed
the relevant acceptance form(s) and returned the same together with a counterpart of the award
notice(s) to the trustee through HISGL within the period prescribed in the award notice(s), HISGL shall
during the award period pay or cause to be paid to the trustee for purchasing the awarded shares
(“Reference Amount”).
After receiving the Reference Amount, the Trustee shall apply the same towards the purchase of
awarded shares in the market through a broker at the prevailing market price on the Stock Exchange
pursuant to the Scheme Rules and HISGL would recognise as treasury shares in the consolidated
statement of changes in equity.
F-168
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 439
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL (Continued)
The Administration Committee shall conduct a review of the performance conditions (if any) in relation
to each Selected Participant at least once in each financial year during the award period if the award
period is more than 12 months or once only during the award period if the award period is less than
12 months. The awarded shares will be vested if the Selected Participant is able to meet the relevant
service conditions during the relevant period, or lapsed if the Selected Participant is unable to meet
the relevant service conditions during the relevant period.
A Selected Participant shall not exercise or direct the trustee to exercise and the trustee shall not exercise
the voting rights in respect of any awarded shares held under the trust.
Details of the awarded shares granted and unvested as at 31 December 2021 are set out below.
Number of Number of Number of Number of Fair value
Date of awarded awarded shares awarded shares awarded shares awarded shares as at
shares granted granted vested lapsed unvested Vesting dates grant date
(note (h)) HKD
11 May 2018 7,010,493 5,923,076 1,087,417 – note (a) 32,108,000
25 March 2019 6,848,366 4,057,693 1,169,819 1,620,854 note (b) 21,024,000
29 October 2019 8,175,000 5,000,000 1,540,000 1,635,000 note (c) 18,557,000
25 March 2020 14,294,205 4,359,028 2,428,918 7,506,259 note (d) 28,731,000
3 July 2020 7,700,000 7,700,000 – – note (e) 16,016,000
25 March 2021 29,000,000 29,000,000 – – note (f) 69,890,000
31 August 2021 36,788,082 15,800,639 187,600 20,799,843 note (g) 82,773,000
For the shares granted, the fair value of the shares were measured at the market price of HISGL’s shares.
For the year ended 31 December 2021, the Group has recognised an equity settled share-based payment
of RMB106,824 thousand (31 December 2020: RMB37,689 thousand) for the Scheme in consolidated
statement of profit or loss.
As at 31 December 2021, HISGL did not have any awarded shares granted on 11 May 2018 which were
outstanding under the Scheme (2020: 1,860,031 awarded shares). During the current year, 108,413
(2020: 221,869) and 1,751,618 (2020: 1,971,575) awarded shares granted on 11 May 2018 were
lapsed and vested respectively.
As at 31 December 2021, HISGL had 1,620,854 (2020: 3,988,774) awarded shares granted on 25 March
2019 which were outstanding under the Scheme. During the current year, 433,949 (2020: 258,719)
and 1,933,971 (2020: 2,123,722) awarded shares granted on 25 March 2019 were lapsed and vested
respectively.
As at 31 December 2021, HISGL had 1,635,000 (2020: 4,760,000) awarded shares granted on 29
October 2019 which were outstanding under the Scheme. During the current year, 740,000 (2020:
470,000) and 2,385,000 (2020: 2,615,000) awarded shares granted on 29 October 2019 were lapsed
and vested respectively.
F-169
440 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL (Continued)
As at 31 December 2021, HISGL had 7,506,259 (2020: 13,463,223) awarded shares granted on 25
March 2020 which were outstanding under the Scheme. During the current year, 1,597,936 (2020:
830,982) and 4,359,028 awarded shares granted on 25 March 2020 were lapsed and vested respectively.
As at 31 December 2021, HISGL had no awarded shares granted on 3 July 2020 which were outstanding
under the Scheme. All 7,700,000 awarded shares granted on 3 July 2020 were vested during the year
ended 31 December 2020.
As at 31 December 2021, HISGL had no awarded shares granted on 25 March 2021 which were
outstanding under the Scheme. During the current year, all 29,000,000 awarded shares granted on
25 March 2021 were vested.
As at 31 December 2021, HISGL had 20,799,843 awarded shares granted on 31 August 2021 which
were outstanding under the Scheme. During the current year, 187,600 and 15,800,639 awarded shares
granted on 31 August 2021 were lapsed and vested respectively.
Notes:
(a) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 11 May 2018
was on 13 May 2019 while the vesting date of another one-third of award shares granted on 11 May 2018
would be on 13 May 2020 and the vesting date for the remaining would be on 13 May 2021.
(b) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 25 March 2019
was on 23 March 2020 while the vesting date of another one-third of award shares granted on 25 March
2019 would be on 23 March 2021 and the vesting date for the remaining would be on 23 March 2022.
(c) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 29 October
2019 was on 2 January 2020 while the vesting date of another one-third of award shares granted on 29
October 2019 would be on 2 January 2021 and the vesting date for the remaining would be on 2 January
2022.
(d) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 25 March 2020
was on 24 March 2021 while the vesting date of another one-third of award shares granted on 25 March
2020 would be on 24 March 2022 and the vesting date for the remaining would be on 24 March 2023.
(e) Pursuant to the agreed terms, the vesting date of all the award shares granted on 3 July 2020 was on 15
July 2020.
(f) Pursuant to the agreed terms, the vesting date of all the award shares granted on 25 March 2021 was on
30 April 2021.
(g) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 31 August
2021 was on 30 September 2021 while the vesting date of another one-third of award shares granted on
31 August 2021 would be on 30 September 2022 and the vesting date for the remaining would be on 30
September 2023.
(h) Awarded Shares would lapse prior to their vesting date as a result of staff separations. Pursuant to
the agreement, the lapsed shares would be held by the trustee which is subject to the approval from
Administration Committee for re-selection of any Selected Participant. The lapsed Awarded Shares were
transferred out from share award reserve to share premium as disclosed in the consolidated statement of
changes in equity.
F-170
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 441
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL (Continued)
Movements of shares held under the Scheme during the year are as follows:
2021 2020
Number of Number of
HKD’000 shares HKD’000 shares
As at 1 January 389,986 172,705,979 207,210 62,273,142
Purchased during the year – – 230,980 126,069,000
Vested and transferred out during
the year (120,254) (55,296,256) (48,204) (15,636,163)
As at 31 December 269,732 117,409,723 389,986 172,705,979
74. RELATED PARTY TRANSACTIONS
In addition to the joints and associates of the Group set out in note 25 above, the name and the
relationship of other related parties are set out as below:
Name of the related party Relationship of the related party
Shanghai Guosheng (Group) Co., Ltd. Shareholders with shareholdings of 5% or above in
the company
Bright Foods (Group) Co., Ltd. Significant influence
Shanghai Electric (Group) Corporation Significant influence
F-171
442 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
74. RELATED PARTY TRANSACTIONS (CONTINUED)
Name of the related party Relationship of the related party
– Shanghai Tongguan Investment Management Joint venture
Partnership (Limited partnership)
– Fullgoal Fund Management Co., Ltd. Associated enterprise
– Liaoning energy investment (Group) Co. Ltd. Associated enterprise
– Haitong Xingtai (Anhui) Emerging Industry Associated enterprise
Investment Fund (Limited Partnership)
– Jilin Modern Agricultural and Emerging Associated enterprise
Markets Investment Fund Limited
– Liaoning China-Germany Industrial Equity Associated enterprise
Investment Fund (Limited Partnership)
– Shanghai Equity Investment Fund (Limited Associated enterprise
Partnership)
– Shanghai Equity Investment Fund II (Limited Associated enterprise
Partnership)
– Hefei Haitong Huiyin Equity Investment Associated enterprise
Partnership (Limited partnership)
– Xi’an Aerospace and New Energy Industry Associated enterprise
Fund
– Jiaxing Haitong Xuchu Equity Investment Associated enterprise
Fund Limited Partnership
– Xi’an Civil-Military Integration Satellite Associated enterprise
Investment Fund Co., Ltd.
– Guangdong South Media Integration Fund Associated enterprise
(Limited Partnership)
– Haitong (Jilin) Equity Investment Fund Associated enterprise
(Limited Partnership)
– Haitong (Jilin) Modern Service Industry Associated enterprise
Investment Fund (Limited Partnership)
– Xuchang Haitong Innovation Equity Associated enterprise
Investment Fund Limited Partnership
– Shanghai Cultural Industries Investment Fund Associated enterprise
(Limited Partnership)
– Haitong Qidong (Weihai) Equity Investment Associated enterprise
Fund (Limited Partnership)
F-172
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 443
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
74. RELATED PARTY TRANSACTIONS (CONTINUED)
The Group’s major transactions with related parties are as follows:
2021 2020
RMB’000 RMB’000
Commission and fee income from:
– Fullgoal Fund Management Co., Ltd. 190,721 104,038
– Liaoning energy investment (Group) Co.Ltd 25,472 15,886
– Haitong Xingtai (Anhui) Emerging Industry Investment Fund
(Limited Partnership) 23,151 28,749
– Jilin Modern Agricultural and Emerging Markets Investment
Fund Limited 22,267 25,558
– Liaoning China-Germany Industrial Equity Investment Fund
(Limited Partnership) 16,981 17,000
– Shanghai Equity Investment Fund (Limited Partnership) 15,235 32,987
– Shanghai Equity Investment Fund II (Limited Partnership) 15,205 15,191
– Hefei Haitong Huiyin Equity Investment Partnership
(Limited partnership) 8,491 –
– Xi’an Aerospace and New Energy Industry Fund 7,787 14,642
– Jiaxing Haitong Xuchu Equity Investment Fund
Limited Partnership 4,885 1,221
– Xi’an Civil-Military Integration Satellite Investment Fund Co., Ltd. 4,505 4,028
– Guangdong South Media Integration Fund (Limited Partnership) 4,441 4,835
– Bright Foods(Group) Co., Ltd. 4,104 1,797
– Shanghai Guosheng(Group) Co., Ltd. 3,562 2,353
– Haitong (Jilin) Equity Investment Fund (Limited Partnership) 1,689 2,579
– Haitong (Jilin) Modern Service Industry Investment Fund
(Limited Partnership) 1,283 3,037
– Shanghai Electric (Group) Corporation 697 –
– Shanghai Tongguan Investment Management Partnership
(Limited partnership) 503 –
– Xuchang Haitong Innovation Equity Investment Fund
Limited Partnership 94 –
– Shanghai Cultural Industries Investment Fund
(Limited Partnership) 17 23,440
– Haitong Qidong (Weihai) Equity Investment Fund
(Limited Partnership) – 4,813
– Gui’an UniTrust Finance Leasing Co., Ltd. – 11
Commission and fee expenses to
– Shanghai Equity Investment Fund (Limited Partnership) – 23,030
F-173
444 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
74. RELATED PARTY TRANSACTIONS (CONTINUED)
2021 2020
RMB’000 RMB’000
Net interest Income from
– Shanghai Electric (Group) Corporation 855 –
– Xi’an Aerospace and New Energy Industry Fund 355 –
– Shanghai Equity Investment Fund (Limited Partnership) 327 –
– Shanghai Guosheng (Group) Co., Ltd. 149 –
– Shanghai Tongguan Investment Management Partnership
(Limited partnership) 145 –
– Gui’an UniTrust Finance Leasing Co., Ltd. – 42,146
– Others (Note) 196 –
Net Investment income
– Shanghai Equity Investment Fund (Limited Partnership) 5,630 –
– Shanghai Guosheng (Group) Co., Ltd. (3,603) –
– Shanghai Cultural Industries Investment Fund
(Limited Partnership) – 13,206
– Shanghai Equity Investment Fund II (Limited Partnership) – 28
2021/12/31 2020/12/31
RMB’000 RMB’000
Accounts receivables from:
– Shanghai Cultural Industries Investment Fund
(Limited Partnership) 17,080 –
– Shanghai Guosheng(Group) Co., Ltd. 585 810
– Others (Note) 40 40
F-174
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 445
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
74. RELATED PARTY TRANSACTIONS (CONTINUED)
2021/12/31 2020/12/31
RMB’000 RMB’000
Accounts payable to brokerage clients
– Shanghai Guosheng(Group) Co., Ltd. (174,699) –
– Xi’an Aerospace and New Energy Industry Fund (150,000) (1,690)
– Shanghai Electric (Group) Corporation (7,762) –
– Shanghai Equity Investment Fund (Limited Partnership) (926) –
– Jiaxing Haitong Xuchu Equity Investment Fund Limited
Partnership (304) –
– Jilin Modern Agricultural and Emerging Markets
Investment Fund Limited (147) (842)
– Fullgoal Fund Management Co., Ltd. – (36,240)
– Others (Note) (54) –
Accounts payable to
– Shanghai Guosheng(Group) Co., Ltd. (91,600) –
Derivative financial assets
– Shanghai Guosheng(Group) Co., Ltd. 949 –
The remuneration of the key management personnel of the Group was as follows
Twelve months ended 31
December
2021 2020
Short-term benefits:
– Fees, salaries, commission and bonuses 66,790 66,504
Post-employment benefits:
– Employer’s contribution to pension schemes/annuity plans 1,054 783
Note: “others” includes Bright Foods(Group) Co.,Ltd., Guangdong South Media Integration Fund (Limited
Partnership), Shanghai Cultural Industries Investment Fund (Limited Partnership), Jiaxing Haitong Xuchu
Equity Investment Fund Limited Partnership, Shanghai Equity Investment Fund II (Limited Partnership), Jilin
Modern Agricultural and Emerging Markets Investment Fund Limited, Liaoning energy investment (Group)
Co. Ltd, Liaoning China-Germany Industrial Equity Investment., Shanghai Tongguan Investment Management
Partnership (Limited partnership), Xi’an Civil-Military Integration Satellite Investment Fund Co., Ltd.
F-175
446 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
75. STATEMENT OF FINANCIAL POSITION AND RESERVE OF THE COMPANY
2021/12/31 2020/12/31
RMB’000 RMB’000
Non-current assets
Property and equipment 8,049,110 6,398,287
Right-of-use assets 503,127 513,406
Investment properties 14,156 13,279
Other intangible assets 326,010 300,063
Investments in subsidiaries 36,897,561 33,697,561
Investments accounted for using equity method 1,957,895 1,448,469
Equity instruments at fair value through other
comprehensive income 10,183,589 15,984,456
Debt instruments at fair value through other
comprehensive income 31,666,415 10,573,687
Financial assets at fair value through profit or loss 3,221,175 293,195
Financial assets held under resale agreements 575,403 2,198,497
Deferred tax assets 2,307,574 1,654,578
Total non-current assets 95,702,015 73,075,478
Current assets
Advances to customers on margin financing 67,692,375 62,585,416
Accounts receivable 1,948,966 1,458,059
Debt instruments at fair value through other
comprehensive income 3,511,075 1,194,036
Financial assets at fair value through profit or loss 143,813,600 118,661,405
Derivative financial assets 354,430 109,961
Financial assets held under resale agreements 28,762,510 43,845,060
Other receivables and prepayments 3,547,890 1,190,035
Amount due from subsidiaries – 6,718,097
Deposits with exchanges 3,949,885 2,791,802
Clearing settlement funds 23,908,471 12,053,285
Bank balances and cash 93,457,408 74,010,192
Total current assets 370,946,610 324,617,348
Total assets 466,648,625 397,692,826
F-176
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 447
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
75. STATEMENT OF FINANCIAL POSITION AND RESERVE OF THE COMPANY
(CONTINUED)
2021/12/31 2020/12/31
RMB’000 RMB’000
Current liabilities
Borrowings 2,237 2,296
Short-term financing bills payables 13,316,578 14,954,953
Bonds Payable 32,879,392 33,643,872
Accounts payable to brokerage clients 72,910,212 67,034,114
Other payables and accruals 12,533,410 7,031,235
Amount due to subsidiaries 56,020 355,854
Lease liabilities 134,889 144,514
Tax liabilities 1,106,393 1,447,659
Financial liabilities at fair value through profit or loss 476,840 1,257,043
Derivative financial liabilities 619,042 543,532
Financial assets sold under repurchase agreements 89,332,831 48,997,606
Placements from other financial institutions 10,015,659 8,801,862
Total current liabilities 233,383,503 184,214,540
Net current assets 137,563,107 140,402,808
Total assets less current liabilities 233,265,122 213,478,286
Equity
Share capital 13,064,200 13,064,200
Capital reserve 74,772,635 74,772,635
Revaluation reserve 411,800 499,138
General reserves 26,080,817 22,989,516
Retained earnings 30,179,778 26,119,699
Total equity 144,509,230 137,445,188
Non-current liabilities
Long-term borrowings 2,092,000 2,112,000
Bonds payables 80,354,269 66,226,560
Other payables and accruals 310,994 287,209
Financial liabilities at fair value through profit or loss 5,639,743 7,062,075
Lease liabilities 358,886 345,254
Total non-current liabilities 88,755,892 76,033,098
Total equity and non-current liabilities 233,265,122 213,478,286
F-177
448 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
75. STATEMENT OF FINANCIAL POSITION AND RESERVE OF THE COMPANY
(CONTINUED)
Share Capital Revaluation General Retained
Capital Reserve reserve Reserves Earnings Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note)
As at 1 January 2021 13,064,200 74,772,635 499,138 22,989,516 26,119,699 137,445,188
Profit for the year – – – – 10,304,336 10,304,336
Other comprehensive income for the year – – 25,756 – – 25,756
Total comprehensive income for the year – – 25,756 – 10,304,336 10,330,092
Appropriation to general reserves – – – 3,091,301 (3,091,301) –
Cash dividends recognised as distribution – – – – (3,266,050) (3,266,050)
Disposal of equity instruments at fair value
through other comprehensive income – – (113,094) – 113,094 –
As at 31 December 2021 13,064,200 74,772,635 411,800 26,080,817 30,179,778 144,509,230
As at 1 January 2020 11,501,700 56,486,199 183,999 20,807,136 24,708,237 113,687,271
Profit for the year – – – – 7,274,600 7,274,600
Other comprehensive income for the year – – 292,357 – – 292,357
Total comprehensive income for the year – – 292,357 – 7,274,600 7,566,957
Shares issued by the company 1,562,500 18,286,436 – – – 19,848,936
Appropriation to general reserves – – – 2,182,380 (2,182,380) –
Cash dividends recognised as distribution – – – – (3,657,976) (3,657,976)
Disposal of equity instruments at fair value
through other comprehensive income – – 22,782 – (22,782) –
As at 31 December 2020 13,064,200 74,772,635 499,138 22,989,516 26,119,699 137,445,188
Note: Capital reserve of the Company represents primarily the share premium arisen from the issuance of the
Company’s shares.
F-178
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 449
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT
Risk Management Policy and Organizational Structure
Risk Management Policy
The Company pays great attention on risk prevention and control with the principles of “pragmatic,
pioneering, steady and excellent” operation and “being prudent and even conservative” risk
management, giving priorities for compliance and risk management in terms of company operation. The
Company has established a sound and effective risk management framework in accordance with relevant
regulations, laws and regulatory requirements strictly. Engraved with the bottom line of compliance,
the Company prevents the compliance risk, money laundering risk and terrorist financing risk through
all kinds of compliance management instruments and compliance monitoring approaches, and the
Company also allocates asset steadily, standardizes business processes and comprehensively strengthens
prevention, monitoring and post-control for various risks by measuring risks through approaches such
as credit investigation and extension, duration analysis, foreign exchange exposure analysis, value at
risk analysis, the minimum survival period calculation of the cash flow, gap analysis, sensitivity analysis
and stress test, also by establishing a monitoring system for risk control indicators such as net capital.
Meanwhile, the Company has integrated the T+1 risk data management of subsidiaries at home
and abroad into a unified system to implement vertical risk management, introduced consolidated
management of risk control indicators, improved the frequency and quality of risk data reporting of
the subsidiaries, as well as promoted the full coverage of conglomerate risk management.
The Company has formulated policies and procedures to identify and evaluate major risks such as credit
risk, market risk and liquidity risk occurred in using financial instruments. The Company has strictly
carried out risk limits management and internal control processes, scientifically used quantitative model
for measurement, as well as carefully considered relevant limitations to perfect various professional
information management systems and risk data management to support the efficiency of the risk
management functions.
Organizational Structure of Risk Management
The Company makes standardized operations according to the Company Law, the Securities Law,
the Guidelines for Internal Control of Investment Banking Business of Securities Companies, the
Standards of Comprehensive Risk Management of Securities Companies and the Articles of Association.
Considering the needs of business development and risk management, the Company has built multi-
level organizational structure of risk management and determined specific responsibilities in risk
management for the board of directors, the board of supervisors, the management, the Chief Risk
Officer (“CRO”), the risk management department, the business and administration department,
branches and subsidiaries.
The board of directors make and approve the strategic objectives of risk management. Its responsibilities
include the review and approval for the Company’s overall risk management objectives, fundamental
policies and major system, overall risk appetite and risk tolerance, as well as solutions of significant
risks; regular risk evaluation and reporting, supervision for the implementation of risk management
policies; appointment and assessment of the CRO; establishing the mechanism for direct communication
with the CRO, and other responsibilities stipulated in the Articles of Association. The board of directors
have set up the Compliance and Risk Management Committee to perform risk management functions.
F-179
450 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Risk Management Policy and Organizational Structure (Continued)
Organizational Structure of Risk Management (Continued)
The board of supervisors supervise the Company’s risk management and internal control system. Its
responsibilities include supervisions on the risk management and internal control established and
implemented by the board of directors and managers, as well as other responsibilities stipulated in the
Articles of Association.
Based on the approval of the board of directors, the management is required to set up an organizational
structure with clear responsibilities and processes, make risk management policies, rules and system,
carry out overall risk appetite and risk tolerance policies, identify and evaluate all kinds of risks,
effectively leverage the sound risk management system and mechanism, timely respond to defects and
issues, deliberate significant risk accidents, establish an overall performance evaluation system covering
risk management effectiveness, build a perfect IT system and data quality control mechanism, as well
as perform other risk management functions given by the board of directors.
The CRO appointed by the chairman of directors is the senior management who is responsible for
the overall risk management of the Company. The CRO is required to organize and implement risk
management policies, rules and system determined by the board of directors, arrange supervisions,
reviews and evaluations for risk management system established and perfected by the Company, arrange
supervisions and inspections for the implementation of risk management policies and procedures, make
suggestions and supervisions for improvements on issues in the risk management and regularly organize
evaluations for operations and the level of major risks, file the evaluation report to the management, the
board of directors and regulatory department, as well as organize the recommendation and assessment
for the person in charge of risk management in subsidiaries.
The risk management department led by the CRO performs risk management functions, which is
required to draft risk management policies, rules and system, supervise and guide other departments
to make the business risk management system and procedures, identify and evaluate major risks of
the Company’s businesses, organize supervisions and inspections for the implementation of the risk
management system of different businesses, regularly evaluate and report overall risk level and risk
management, as well as timely report significant potential risks or risk issues and give suggestions
accordingly. In addition, the compliance and legal department is responsible for the management of
compliance risk, money laundering risk and terrorist financing risk, the funds management head office
is responsible for the liquidity risk, the general manager office is responsible for the reputational risk,
and the IT management department is responsible for the IT risk.
The Company’s departments, branches and subsidiaries are responsible for the risk management
within the scope of their operation and management, establishing the sound risk management system
and procedures, accordingly, implementing risk management policies and completing related risk
management duties. The heads of the above departments, branches and subsidiaries assume direct
responsibilities of risk management effectiveness. The departments, branches and subsidiaries appoint
personnel to perform risk management functions in respective unit, including the supervision, inspection
and reporting for the implementation of risk management policies and system, as well front-line
management responsibilities.
F-180
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 451
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Risk Management Policy and Organizational Structure (Continued)
Organizational Structure of Risk Management (Continued)
The Company’s audit department carries out regular inspections for risk management and regular
evaluations for the effectiveness of the risk management system, and make suggestions for improvement
based on the evaluation result.
All subsidiaries operate in a risk standardized manner and operate in accordance with the law. The Group
has integrated the risk management of subsidiaries into the Group’s overall risk management system
through various mechanisms and further implemented the vertical risk management for subsidiaries
in terms of nomination of subsidiaries’ risk management principal, limit and report, consolidated
management of risk control indicators, approval of major risk events, data docking, supervision and
inspection, evaluation and assessment, etc.
Credit risk management
Credit risk refers to the risk that may cause losses for the Group‘s operation due to the inability of the
debtor, counterparty or debt issuer to fulfil its agreed financial obligations or the deterioration of its
credit quality.
The currency funds are primarily deposited in state-owned commercial banks or joint-stock commercial
banks with good reputation. The clearing settlement funds are deposited in CSDC. The credit risk of
cash and cash equivalents is relatively low. The economic matter adopts full margin settlement to avoid
relevant credit risks.
The transactional financing business carried out by the Group mainly includes margin financing and
securities lending, stock-pledged repurchase, margin trading, and contractual repurchase securities
transactions. The Group mainly controls the credit risk of customers through due diligence, internal
rating, credit review, post-loan asset inspection, close a position, etc. During the reporting period,
relevant entities of the Group continued to strengthen the credit and concentration management
mechanism, dynamically optimised the credit rating and secured securities conversion rate models for
specific customer groups, proactively adjusted the asset portfolio structure, and advanced risk mitigation
procedures.
The Group emphasises the control of concentration risk through investment diversification, and mainly
favours the investment targets involving assets with high credit ratings. In credit risk management,
the Group closely tracks the operating conditions and changes in credit rating of investment targets,
implements the internal rating and unified credit management mechanisms, and establishes and improves
relevant credit risk monitoring indicators regarding issuer, industry and geographic concentration. In
post-investment management, the Group updates the debt issuer’s internal rating and credit limit in a
timely manner based on changes in financial indicators, major risk events and negative public opinion,
and dynamically adjusts the trading strategies.
In terms of financial leasing, the Group adopts a strategy of equal emphasis on industry and customer
to determine credit risk management policies. In terms of industry credit risk management, the Group
conducts dynamic tracking and assessment of the degree of prosperity of the industry in which the
financial leasing customer is located, formulates the corresponding industry delivery policy and controls
the risk of industry concentration on the basis of this. In terms of customer credit risk control, the
Group mainly controls the credit risk of customers through due diligence, internal rating, credit review,
post-loan asset inspection, risk early warning and monitoring, concentration limit control, etc.
F-181
452 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
For short-term interbank placement businesses such as bond repurchase, the Group carries out risk
control from the perspectives of counterparty selection and credit management, prudently selects
counterparties with good credit qualifications and secured securities with higher credit ratings, in an
effort to control the level of credit risk from the source. For OTC derivatives, the Group has established
sound management systems and procedures in terms of counterparty selection and credit management,
underlying securities management, risk response and disposal, etc., conducts daily marking-to-market
over the trading of OTC derivatives during the operating period, and manages counterparty credit risk
through strict implementation of measures such as netting settlement and performance guarantee.
The counterparties of the Group’s short-term interbank placements and OTC derivatives businesses are
mainly commercial banks, securities companies, asset management plans (AMPs) and other entities.
In handling such business, the Group chooses appropriate business models, strictly controls the
business scale and takes reasonable risk control measures. In addition, the Group pays attention to the
correlation between credit risk and market risk, and takes necessary monitoring and response measures
against credit risk in the context of market volatility, including but not limited to transaction margin
arrangements, counterparty internal rating and credit management, future potential risk exposure
measurement, wrong-way risk identification, etc.
The Group continues to improve its credit risk management system in accordance with industry
regulatory policies, capital market conditions and the Group’s business development strategies. During
the reporting period, with reference to relevant policies such as the credit risk management measures,
the Group fully implemented the credit risk identification, assessment, measurement, monitoring,
reporting and response work by customers and businesses, including leveraging the Group’s T+1 risk
data market to establish and improve the credit risk management information system that can cover
the businesses of parent and subsidiary companies, continuing to improve the credit risk limit system in
the dimensions of asset quality, risk offsetting and concentration risk by enhancing risk identification,
measurement and stress testing capabilities, striving to promote the unified rating and centralised
credit management mechanism, developing customer relationship map, public opinion risk monitoring
and high-risk customer management and control tools supported by cloud computing, blockchain, big
data, artificial intelligence and other financial technologies, and strengthening the systematic reporting
procedures of credit business risk assets, so as to effectively track and monitor the Group’s overall credit
risk profile and risk limit implementation. During the reporting period, the Group incorporated ESG risk
into the credit risk management system, formulated ESG risk management measures, and developed
an ESG risk assessment model. Based on customer ESG due diligence and ESG risk assessment, the
Group established a customer ESG risk identification, tracking and monitoring mechanism. During the
reporting period, the Group’s core credit risk monitoring indicators were stable, and the overall credit
risk was controllable. For the three financing businesses, the Company proactively optimised the business
structure, prudently evaluated new projects, strengthened the tracking, monitoring and management
of existing projects, intensified recovery efforts for existing risky projects, and prudently and forwardly
made provision for credit impairment to ensure adequate risk provision.
F-182
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 453
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Measurement of ECL model
The Company divides the impairment into stages based on individual financial instrument or financial
instrument portfolio so as to effectively monitor the credit risks of the assets and makes adjustments on
regular basis. For different types of businesses, the Company establishes distinct criteria for each stage,
including but not limited to factors such as the obligor’s financial and operating situations, changes
in credit rating, collaterals and guarantees, significant negative public sentiment, judicial litigation and
overdue information etc., so as to comprehensively reveal business risk degree and dynamically reflect
reliability of the obligor’s performance, providing basis for division of impairment stages. The Company
categorizes the impairment of financial instruments into three stages:
(1) Stage I
The first stage includes financial instruments with low credit risk on the reporting date or
without significant increase in credit risk since initial recognition. The Company measures the
impairment provision according to the amount equivalent to the expected-credit-loss of the
financial instrument in the next 12 months (if the expected lifetime is less than 12 months, it
shall be within the lifetime).
(2) Stage II
The second stage includes financial instruments with significant increase in credit risk since initial
recognition but without credit impairment, i.e. there is no objective evidence indicating that
the financial instrument has become credit-impaired. The Company measures the impairment
provision according to the amount equivalent to the expected-credit-loss of the financial
instrument in the entire duration.
(3) Stage III
The third stage includes financial instruments that are credit impaired, the Company measures
the impairment provision according to the amount equivalent to the expected-credit-loss of the
financial instrument in the entire duration. Evidences that the financial instruments have become
credit-impaired include but not limited to the following observable events:
Significant financial difficulty of the obligor;
A breach of contract by the obligor, such as a default or overdue in interest or principal payments
over 90 (inclusive) calendar days;
It becomes probable that the obligor will enter bankruptcy or other financial reorganizations;
The disappearance of an active market for given financial assets because of financial difficulties
of the obligor;
F-183
454 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Measurement of ECL model (Continued)
(3) Stage III (Continued)
The obligor is obviously lack of or has lost solvency, being assigned with a manager by the court
or has started relevant legal proceedings;
The creditor, for economic or contractual reasons relating to the obligor’s financial difficulty,
granting a concession to the obligor that would not otherwise grant, including but not limited
to debt reduction and exemption, paying-a-debt-in-kind and debt-to-equity swap;
The obligor has ceased operating activities, with business license cancelled or revoked by the
competent authority;
The obligor legally declared bankruptcy, shutdown, dismission and termination of legal person
qualification.
Credit impairment of the financial instruments may arise from combined effect of several events, and
may not necessary be arising from an individually identifiable event.
Criteria for judging a significant increase in credit risk
At the end of each reporting period, the Company assesses the financial instruments other than
accounts receivable regarding whether their credit risks have increased significantly since initial
recognition. The Company comprehensively assesses and considers credit risks based on nature of the
financial instruments and risk factors of the debtor. When assessing whether there has been a significant
increase in credit risk, the Company thinks it is necessary to consider the factors that include but are
not limited to:
The practical or anticipated significant downgrading of the internal credit risk rating of the obligor
since initial recognition, or significant decrease in the internal behavior score used for assessing
credit risk;
Upon initial recognition, downgrading of the obligor’s entity or debt rating above AA level
(inclusive) granted by the rating institution in mainland China, and the downgraded level is below
AA (exclusive); downgrading the obligor’s entity or debt rating above BBB-/Baa3 level (inclusive)
granted by the major three international rating institutions, and the downgraded level is below
BBB-/Baa3 (exclusive);
Upon initial recognition, downgrading of the obligor’s entity or debt rating below AA level
granted by the rating institution in mainland China; downgrading the obligor’s entity or debt
rating below BBB-/Baa3 level granted by the major three international rating institutions;
F-184
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 455
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Criteria for judging a significant increase in credit risk (Continued)
Obligor fails to make repayments as scheduled, including both failure to repay the principal and
the failure to repay the interest and debts under other items specified in the agreement in full
amount, and such situation has lasted for more than 30 (inclusive) calendar days;
Significant changes in the value of collateral or the guarantee provided by a third party, which
may weaken the debtor’s economic motive to repay within the prescribed period, or influence
the probability of default; for example, the decrease in value of pledged securities weakens the
obligor’s performance guarantee, to the extent that the obligor is unable to supplement collateral
within a reasonable period as agreed in the contract or the obligor has a stronger motivation to
default;
Anticipated significant changes with an adverse effect on the operation, finance or macroeconomic
condition that will cause significant changes to the obligor’s economic motive or ability to fulfil
obligations as stipulated in the contract;
Significant changes in the external market indicators for credit risk of specific financial instruments
or similar financial instruments with the same expected maturity; for example, the obligor’s credit
spread, credit default swap or other relevant market information;
The practical or anticipated significant changes in the quality of credit support provided by the
guarantor, which may weaken the obligor’s economic motive to repay within the prescribed
period; for example, if the guarantor stops providing financial support to obligor, the latter will
face bankruptcy or bankruptcy management, or make limited payment necessary for operation
(such as salary and payment to key suppliers) while giving a low priority to paying financial
liabilities, leading to increase in probability of default;
As for securitization, the practical or anticipated significant changes in their credit enhancement
or support quality may lead to decline in ability to absorb expected credit loss by the relevant
subordinated interest;
Other relative changes that can indicate the default risk of financial instruments before expected
maturity, instead of absolute changes in relation to default risk.
The Company finally concludes division of impairment stages of securities margin and stock pledged
repo business in accordance with collateral maintenance ratio of financing entity or contract and
complexity of disposing guarantee securities, and comprehensively considering factors such as operating
situations, repayment ability, litigation and overdue information of the financing entity at the end of
reporting period. For collateral maintenance ratio, the Company sets up different preliminary margin
call thresholds and forced liquidation thresholds for different financing entities or contracts in line with
credit status of the financing entities at transactions, module to which the guarantee securities belong,
liquidity and trade restriction. The preliminary margin call threshold ranges from 150% to 170% and the
forced liquidation threshold ranges from 130% to 150%. At the stage of impairment assessment, for
purpose of prudently assessing risks of disposing collateralized securities, the Company determines over
loss alert threshold for different financing entities or contracts according to the complexity of disposing
guarantee securities. The over loss alert threshold ranges from 110% to the forced liquidation threshold.
F-185
456 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Criteria for judging a significant increase in credit risk (Continued)
That the collateral maintenance ratio is above or equal to the preliminary margin call threshold
is classified into “Stage I”;
That the collateral maintenance ratio is between the preliminary margin call threshold and the
over loss alert threshold, or satisfying conditions of “significant increase in credit risk” is classified
into “Stage II”’;
That the collateral maintenance ratio is below the over loss alert threshold, or that evidence of
“credit-impaired” is existed is classified into “Stage III”.
Parameters and valuation technique of ECL measurement
The key inputs used by the Company to measure expected credit loss are listed as follows:
Probability of Default (PD);
Loss Given Default (LGD);
Exposure at Default (EAD).
As mentioned above, key parameters usually come from the Company’s internally developed risk
measurement model and other historical data, and adjustments are made to reflect the forward-looking
information of probability weights.
PD refers to estimated value of the likelihood that default will occur within certain period, which is
estimated at a certain time point. LGD refers to estimated value of loss resulting from default, which is
based on the gap between due contractual cash flows and the Company’s expected amount received,
with the consideration of collateral’s expected future cash flows receivable. EAD refers to estimated
value of risk exposure at the date of default in the future, with the consideration of anticipated changes
in risk exposure after the reporting date, such as repayment of principal and interest, and anticipated
loans withdrawn from financing agreements.
The Company uses the ECL model based on three key risk indicators (PD, LGD and EAD) to measure
impairment provision for financial instruments at Stage I and Stage II. The product of these three
indicators is the ECL of the financial instrument. PD is measured by internal or external credit ratings
or at the migration rate or rolling rate calculated based on historical internal data after adjusting
forward-looking information. When assessing LGD, the Company calculates the recoverable cash flows
of guarantee securities after taking into account of the expected disposal cycle of collateralized securities
and impact of value fluctuation within the expected disposal cycle (including factors such as disposable
amount of collateralized securities, daily average trading volume, restrictions against circulation, rules
for shareholding reduction and historical volatility) as well as relevant taxes. EAD reflects unpaid amount
when presuming a default of various financial instruments during corresponding measurement period.
F-186
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 457
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Parameters and valuation technique of ECL measurement (Continued)
For the financial instruments at Stage III, the Company assesses the ECL using individually impairment
assessment method. Specifically, the Company reasonably assesses cash realizable value of disposing
collateralized securities based on specific risks of individual item and adequate considerations about
financial status and operating as a going concern of the obligor and the underlying listed company of
collateralized securities, judicial litigation, restrictions against shareholding reduction, significant negative
public sentiment and delisting risk. Meanwhile, the Company comprehensively judges the obligor’s
expected recoverable cash flow in line with valuation of other supplemental credit enhancement assets
provided by the obligor, the portion that cannot cover its risk exposure after discounting would be
included in impairment provision.
Forward-looking Information
The assessment of significant increase in credit risk (SICR) and the calculation of expected credit losses
(ECL) involve forward-looking information.
For bond investment financial assets, the Company qualitatively selects key economic indicators
as forward-looking factors, and identifies key economic indicators that affect credit risk and ECL,
including the year-on-year growth rate of broad money supply M2. For financing financial assets, the
probability of default (PD) is estimated using the regression analysis method to establish a correlation
model between PD and macroeconomic indicators, which will be used in combination with the forecast
macroeconomic indicators to infer PD changes. Macroeconomic indicators include, but are not limited
to, gross domestic product (GDP) growth rate, broad money supply (M2) growth rate, and fixed asset
investment completion growth rate, etc. By building relationship between these economic indicators
and business risk characteristics, forward-looking adjustments are finally made to ECL of financing
financial assets.
In addition to the benchmark economic scenarios, the Company’s management also provides other
possible scenarios and corresponding weights taking into account the market expectations. The
Company sets different scenarios based on the risk characteristics of main businesses or product
categories to reasonably evaluate the possible changes in risks of relevant financial assets under different
economic scenarios. The Company reassesses the number of scenarios and their characteristics on each
balance sheet date
The Company believes that, for the Company’s credit financial asset portfolio, three different scenarios
(“Optimistic”, “Benchmark” and “Pessimistic”) should be considered to reasonably reflect the possible
impact of selected economic indicators on ECL. The Company determines the weight of each scenario
based on statistical analysis and expert judgement, also considering the range of possible outcomes
represented by each scenario. Currently, the weight of the benchmark scenario used by the Company
exceeds the sum of the weights of other scenarios.
F-187
458 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Forward-looking Information (Continued)
The Company measures the related provision for loss by weighted 12-month ECL (Stage 1) or weighted
lifetime ECL (Stage 2 and Stage 3). The above weighted ECL is calculated by multiplying the ECL under
each scenario by the weight of the corresponding scenario.
Similar to other economic estimates, the forecast economic indicators and probability of occurrence are
inherently highly uncertain. As a result, the actual results may be materially different from the estimates.
The Company believes that these forecasts reflect the Company’s best estimate of possible outcomes.
Sensitivity analysis
The ECL measurement model will use model parameters, macroeconomic variables for forward-
looking forecast, the weights of economic scenarios, and other factors considered when applying
expert judgement. Changes in these parameters, assumptions and judgements will have an impact
on the measurement of SICR and ECL. The Company regularly re-examines the model every year and
appropriately revises the assumptions and parameters used in the model according to the specific
circumstances. The adjustment of the model and parameters this year has no significant impact on the
ECL results.
The Company conducted a sensitivity analysis on the economic indicators used in forward-looking
measurement, which showed that when the weights of the optimistic and pessimistic scenarios changed
by 10%, the impact on the provision for ECL made by the Company would not be significant.
At the same time, the Company also conducted a sensitivity analysis on the stage classification of credit
risk. As of 31 December 2021, assuming that there was no SICR since the initial recognition that might
lead to transfer of all the financial instruments in Stage 2 to Stage 1, the impact on the ECL recognised
in the balance sheet would not be significant.
Collateral and other credit enhancements
The Company adopts a series of policies and credit enhancements to lower credit risk exposure to
acceptable levels. Among them, the most common method is to provide collateral or guarantee. The
amount and type of collateral required depend on an assessment on the credit risk of the counterparty.
The collaterals under the financing and repurchase agreements are mainly stocks, bonds and funds.
The Company regularly monitors the market value of the collateral, requests additional collateral when
needed according to the contract, and monitors changes in the market value of the collateral when
reviewing the adequacy of loss provision.
F-188
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 459
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Collateral and other credit enhancements (Continued)
Management of Impairment of Financial Instruments
To ensure the validity of preparing for impairment of financial instruments, the Company has established
a range of policies and processes that are in line with credit risk management objectives for financial
instruments. The Company has established a counter-balanced and collaborative working mechanism
among business departments, risk management departments and finance departments, and has clarified
department responsibilities, so as to measure credit risk of financial instruments and prepare for credit
impairment in a prompt, accurate and reasonable manner. The Company’s management and authorized
agency manage its impairment of financial instruments through the following measures:
Establish a credit risk management framework with clarified rights and liabilities and a complete
system based on corporate strategy and risk appetite, and make adjustments promptly;
Organize and improve assessment on impairment of financial instruments at the balance sheet
date, and ensure that the validation, development and maintenance of the impairment model is
effectively guaranteed;
Assess impairment of the Company’s financial instruments and potential financial impact, and
report to the Board of Directors promptly;
Review the Company’s decisions on major impairment events;
Establish integrated information system and data quality control mechanism for impairment of
financial instruments;
Other credit risk management responsibilities promised by the Board of Directors.
Since 2021, based on the accumulated management experience, the Company has revised the Policy
for the Management of Impairment of Financial Instruments of Haitong Securities Co., Ltd., and the
current expected credit loss model used for the measurement of credit impairment reserves operates
stably and responds sensitively to the change of credit risk. The measurement of the expected credit
loss can dynamically describe the change of the obligor’s credit qualification, the fluctuation of market
conditions, the impact of macro-economic changes and other factors. The implementation of relevant
policies and processes for the management of impairment of financial instruments, which provides a
guarantee for the reasonableness and timeliness of the Company’s provision for credit impairment.
F-189
460 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Collateral and other credit enhancements (Continued)
Management of Impairment of Financial Instruments (Continued)
Without taking into account available collateral or other credit enhancements, the amounts representing
the Group’s maximum credit risk exposure at the balance sheet date are as follows:
2021/12/31 2020/12/31
RMB’000 RMB’000
Advances to customers on margin financing 75,223,404 73,067,592
Accounts receivable 11,372,016 8,410,000
Other receivables 6,038,830 3,054,694
Other loan and receivables 14,938,665 20,120,007
Debt instruments measured at amortised cost 4,725,209 3,763,499
Finance lease receivables 33,472,587 48,411,403
Receivables arising from sale and lease back arrangements 55,088,023 35,214,476
Debt instruments at fair value through other comprehensive income 37,052,945 13,108,163
Financial assets held under resale agreements 39,761,017 57,965,394
Placements to banks and other financial institutions 352,928 22,619
Financial assets at fair value through profit or loss 121,179,766 110,363,693
Deposits with exchanges 17,655,168 17,374,851
Clearing settlement funds 16,765,418 11,852,301
Bank balances and cash 156,448,162 122,583,420
Restricted bank deposits 1,503,454 1,288,296
Deposits with central banks 3,304,209 3,716,130
Deposits with other banks 226,337 258,664
Loans and advances 4,712,651 3,820,127
Derivative financial assets 1,084,731 1,837,912
Maximum credit exposure 600,905,520 536,233,241
Off balance sheet items credit exposure
Guarantee granted 963,048 1,145,716
Irrevocable commitments 1,824,989 510,162
Maximum off balance sheet items credit exposure 2,788,037 1,655,878
F-190
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 461
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management
Market risk mainly refers to the risk of loss in the business related to self-owned capital investment
due to unfavourable changes in market prices (stock prices, interest rates, exchange rates, etc.) during
the Group’s business activities.
The Group uses the value at risk (VaR) method to assess and analyse the market risk of various
investment financial instruments and positions. The measurement standard includes the parent company,
Haitong bank, Haitong international and other major subsidiaries. The VAR model used by the Group
has a 95% confidence level and the target period is the next trading day. The details are as follows:
VaR 95% in 2021
Value at
risk of the Value at
Value at Value at Company/ risk of the
risk of the risk of the Net assets Group/
Company Group of the Net assets
Item (RMB’000) (RMB’000) Company of the Group
Maximum month-end value in the
Reporting Period 308,906 378,932 0.22% 0.22%
Minimum month-end value in the
Reporting Period 154,452 267,406 0.11% 0.16%
Average month-end value in the
Reporting Period 264,445 341,430 0.19% 0.20%
Year-end value in 2021 246,569 280,569 0.17% 0.16%
VaR 95% in 2020
Value at Value at
Value at Value at risk of the risk of the
risk of the risk of the Company/ Group/
Company Group Net assets of Net assets of
Item (RMB’000) (RMB’000) the Company the Group
Maximum month-end value in the
Reporting Period 172,799 294,799 0.13% 0.17%
Minimum month-end value in the
Reporting Period 95,095 171,380 0.08% 0.12%
Average month-end value in the
Reporting Period 137,732 232,752 0.11% 0.15%
Year-end value in 2020 150,877 259,324 0.11% 0.15%
During the Reporting Period, the ratio of the Company’s risk value to the Company’s net assets at the
end of each month and the ratio of the parent company and the Group’s main subsidiaries’ risk value
to the Group’s net assets were always within 0.3%, and the market risk was controllable and bearable.
F-191
462 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management (Continued)
Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a
result of changes in market prices (other than those arising from interest rate risk or foreign exchange
risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting
equity instruments traded in the market.
The Group’s stock price risk arises from equity investments in financial assets that are classified as
held-for-trading or designated as financial assets at fair value through other comprehensive income
(FVTOCI). The Board of Directors closely monitors investment portfolios to manage risk exposures, and
has hedged risks by entering into derivatives contracts since 2010.
The Group manages and analyses stock price risk based on the impact of securities price fluctuations
on net profit and OCI during the reporting period. When reporting risk internally to key management
personnel, management estimates a reasonable potential price change of 10%. With all other variables
being held constant, if the market price of relevant equity assets rises or falls by 10%, the impact on
the Group’s net profit and OCI will be as follows:
2021 2020
RMB’000 RMB’000
Profit for the year
Increase by 10% 1,821,722 1,770,497
Decrease by 10% (1,821,722) (1,770,497)
Revaluation reserve
Increase by 10% 739,356 17,980
Decrease by 10% (739,356) (17,980)
In the management’s opinion, the sensitivity analysis is unrepresentative of inherent price risk as the
year end exposure does not reflect the exposure during the year.
F-192
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 463
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management (Continued)
Interest rate risk
Interest rate risk refers to the risk caused by changes in the market yield curve or credit spread and
other factors. The businesses that carry such risk mainly include bond investments and interest rate
derivatives. The Company’s control of interest rate risk is mainly realised by scale control and investment
portfolios to achieve reasonable asset allocation, matching the term structures of liabilities and assets,
and measuring interest rate risk by regularly measuring investment portfolio duration, convexity, DV01
and other indicators.
The Group uses sensitivity analysis to measure the possible impact (after tax) of changes in interest
rates on the Company’s net interest income and gains and losses on changes in fair value and equity.
The sensitivity of net interest income refers to the impact on the net interest income arising from the
impact of certain interest rate changes on the financial assets and liabilities held at the end of the
period that are expected to be subject to an interest rate resetting within one year. The calculation of
the sensitivity of gains and losses on changes in fair value and the sensitivity of equity is based on the
impact of the revaluation of the fixed-rate financial assets held at the end of the period as financial
assets held for trading and other debt investments in response to certain interest rates changes.
If the market interest rate rises or falls 25 basis points while other variables are held constant, the
impacts on the Group’s net profit and other comprehensive income are as follows:
2021 2020
RMB’000 RMB’000
Profit after income tax for the year
Increase by 25bps (245,317) (578,873)
Decrease by 25bps 253,012 639,750
Other comprehensive income after income tax
Increase by 25bps (175,770) (52,564)
Decrease by 25bps 177,764 53,345
F-193
464 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management (Continued)
Exchange-rate risks
Exchange rate risk refers to the risk resulted from changes in exchange rate. During the reporting period,
with constant improvement of worldwide layout, facing the complicated and changing international
market, the Group took the initiative to lower the asset leverage, reduced the overall scale of assets
dominated in foreign currencies, resulting in a reduced risk exposure of exchange rate. The Group
constantly keeps track of and studies foreign exchange market, makes effort in continuing improvement
of system development and internal management, and hedges and mitigates exchange rate risk through
a series of measures such as hedging. The Group puts priority on the match between assets and liabilities
denominated in foreign currencies to narrow the exposure of foreign exchange risk, and mitigate the
impact of foreign exchange exposure on operating results through net investment hedging for overseas
operations. If RMB is strengthened or weakened by 5% against other foreign currencies while other
variables are held constant, the net profit of the Group will increase or decrease by RMB512 million in
2021 (2020: RMB400 million).
Liquidity risk management
Liquidity risk is the risk to a company’s inability to timely receive sufficient funds from reasonable costs
thus it can’t pay matured debts, fulfil other payable obligations, or meet regular business operation
needs. Macro policies, market changes, operation condition, customer credit, as well as unmatched
asset and liability structure may cause liquidity risk.
In terms of daily liquidity risk management, the Company, in accordance with the requirements of
liquidity risk preference and risk indicator limits, keeps the liquidity risk detectable, controllable and
acceptable, and reserves sufficient high quality liquid assets pursuant to management requirements,
enabling the smooth operation of the Company’s business and the repayment of due liabilities. The
Company carries out ongoing daily liquidity and risk indicators management, and, in combination with
the status of assets and liabilities, develops a fund and indicators interconnected system to improve
the framework for liquidity risk analysis including the follow-up of the daily indicators and position,
prospective analysis of monthly indicators and the breakdown of department indicators, which enrich
the liquidity risk management in different periods and enhance the Company’s efficiency in management
and forecasting of liquidity risk.
F-194
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 465
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk management (Continued)
Regarding the medium and long-term liquidity risk management, the Company makes continuous effort
on the improvement of asset allocation structure. More analysis is conducted for the development
trend of assets and liabilities to control liquidity risks at root. First, the Company establishes the
Asset-liability Allocation Committee to carry out asset-liability management work. Through the timely
analysis of business development trend and potential medium and long-term cash requirements, the
liability maturity structure is adjusted to enable the reasonable matching between the term and scale
of assets and that of liabilities. Second, the Company makes continuous effort on the improvement
of fine management of liquidity, so that the liability structure and the maturity are more reasonable,
maintaining the balance of the assets on safety, liquidity and profitability. During the reporting
period, the Company attached importance to its relationship with commercial banks, gave priority to
standardised operation, and maintained a good reputation while having its financing channel smoothed.
In respect of the management on the group level, the Company has promoted relative requirements
on group and subsidiaries. Firstly, the Company has continued to group management of subsidiaries
from two perspectives of risks, and assets and liabilities management, and make requirements based
on three dimensions, organization system assurance, risk management and control frame, and risk
responses to assist subsidiaries to complete their management system. Secondly, the Company has
formulated quota requirements for subsidiaries, in line with the differences of industries, regions, and
risk features among subsidiaries, based on the liquidity risk consolidated financial statement, in order
to monitor their real situation of liquidity risk efficiently. It is also attributable to transmit liquidity risk
preferences downwards. Lastly, the Company has formulated Support and Manage Method of Group’s
liquidity, for the purpose of reinforcing our capability of disposing liquidity risks and highlighting
group’s advantages in managing, adjusting, and controlling information. It is regarded as the overall
management policy, which initially established the support system of Group’s liquidity, clarifying the
management goals, management principles, labour divisions and responsibilities, and support channels.
All in all, the Company has strived to avoid any liquidity risks from happening within the Group.
F-195
466 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk management (Continued)
The table below lists the cash flows payable upon the maturity of the financial liabilities held by the
Group for the liquidity risk management purpose. The amounts showed in the table are undiscounted
contractual cash flows with principal and interest included.
As at 31 December 2021
Less than 3 months 1 year 5 years
On Demand 3 months to 1 year to 5 years and above Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Borrowings – 28,399,210 21,328,380 31,420,830 596,530 81,744,950
Deposits from central bank – – 158,833 2,163,306 – 2,322,139
Deposits from other banks – – 81,771 – – 81,771
Customer accounts 368,601 1,008,996 1,393,839 3,201,654 – 5,973,090
Accounts payable to brokerage clients 123,202,200 – – – – 123,202,200
Placements from other financial institutions 50 3,641,990 12,792,500 3,051,640 418,340 19,904,520
Financial assets sold under repurchase
agreements 1,608,850 83,854,300 6,560,100 4,500 – 92,027,750
Other payables and accruals 8,472,129 3,546,604 9,206,567 289,053 306,041 21,820,394
Short-term financing bills payables – 7,497,570 17,697,020 5,180 – 25,199,770
Bonds payable – 12,530,850 43,147,340 115,296,610 7,631,490 178,606,290
Financial liabilities at fair value through
profit or loss 5,967,370 639,910 3,848,830 5,716,281 143,831 16,316,222
Derivative financial liabilities – 239,210 597,860 408,260 302,990 1,548,320
Long-term payables – – – 5,890,096 340,248 6,230,344
Lease liabilities 50 95,080 217,100 546,160 296,570 1,154,960
139,619,250 141,453,720 117,030,140 167,993,570 10,036,040 576,132,720
F-196
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 467
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk management (Continued)
As at 31 December 2020
Less than 3 months 1 year 5 years
On Demand 3 months to 1 year to 5 years and above Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Borrowings – 37,013,490 23,534,140 34,735,720 1,559,820 96,843,170
Deposits from central bank 887,565 – – – – 887,565
Deposits from other banks 63,104 – – – – 63,104
Customer accounts 246,035 2,778,433 1,388,920 – – 4,413,388
Accounts payable to brokerage clients 108,410,140 – – – – 108,410,140
Placements from other financial institutions – 8,811,080 – 6,308,920 800 15,120,800
Financial assets sold under
repurchase agreements – 47,163,120 13,546,450 – – 60,709,570
Other payables and accruals 6,065,210 1,950,572 7,184,710 226,809 103,973 15,531,274
Short-term financing bills payables – 31,610,070 7,392,940 – – 39,003,010
Bonds payable – 7,029,690 38,620,830 79,297,090 37,498,590 162,446,200
Financial liabilities at fair value through
profit or loss 20,969,030 559,550 700,300 10,012,230 – 32,241,110
Derivative financial liabilities – 2,202,180 451,250 18,850 – 2,672,280
Long-term payables – – – 7,666,929 339,015 8,005,944
Lease liabilities – 112,290 247,520 538,330 289,250 1,187,390
136,641,084 139,230,475 93,067,060 138,804,878 39,791,448 547,534,945
Capital risk management
Complying with the requirements of Administrative Measures for Risk Control Indicators of Securities
Companies, the Company has compiled regulatory statements and monitored risk indicators such as
net capital on a daily basis. The Company timely monitors and controls businesses and factors that
would influences net capital and risk control indicators to meet compliance requirements. The quality
of group’s overall asset is fine, capital adequacy ratio is high, and risk endurance is strong. Each risk
control indicator complies with relative regulations.
F-197
468 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Capital risk management (Continued)
In accordance with the relevant regulations issued by China Securities Regulatory Commission, the
Company is required to meet the following standards for risk control indicators on a continual basis:
The ratio between its net capital and the sum of its various risk capital provisions shall be no less
than 100% (“Ratio 1”);
The ratio between its net capital and its net assets shall be no less than 20% (“Ratio 2”);
The ratio between its net capital and its liabilities shall be no less than 8% (“Ratio 3”);
The ratio between its net assets and its liabilities shall be no less than 10% (“Ratio 4”);
The ratio between the value of equity securities and equity related derivatives held and its net
capital shall not exceed 100% (“Ratio 5”);
The ratio between the value of non-equity securities held, non-equity related derivatives and net
capital shall not exceed 500% (“Ratio 6”);
The ratio between its core net capital and total assets of in-balance-sheet and off-balance-sheet
shall be no less than 8% (“Ratio 7”);
The ratio between its high quality liquid assets and net cash outflow in 30 days shall be no less
than 100% (“Ratio 8”); and
The ratio between its available stable funding and stable funding needed shall be no less than
100% (“Ratio 9”).
F-198
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 469
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Capital risk management (Continued)
The net capital of a securities company is composed of core net capital and subsidiary net capital.
Core Net Capital = Net Assets
– Risk Adjustment for Asset Items
– Risk Adjustments with Liabilities
-/+Other Adjustments Identified or Approved by the CSRC.
Subsidiary net capital = Long-term subordinated
× set ratio
-/+ other adjustment items identified or approved by the CSRC.
Major Risk Control Indicators
31 December
Risk control indicator 2021
Net capital (RMB ’000) 85,222,468
Ratio 1 200.25%
Ratio 2 58.97%
Ratio 3 34.48%
Ratio 4 58.47%
Ratio 5 24.03%
Ratio 6 201.85%
Ratio 7 22.28%
Ratio 8 259.39%
Ratio 9 157.72%
The above ratios are calculated based on the underlying financial information prepared in accordance
with the relevant accounting rules and financial regulations applicable to enterprises in the People’s
Republic of China regulated by the CSRC.
Certain subsidiaries of the Group are also subject to capital requirements under relevant regulations
in PRC, Hong Kong and other jurisdictions. The capital of the Group mainly comprises its total equity.
The Company attaches vital importance to the influences caused by the significant events such as
dividend distribution, significant investment, and innovation business on risk control indicators. The
Company makes sensitivity analysis or pressure test on risk control indicators such as net capital prior
to implementing above events, and only when complying with regulations of risk control indicator will
the Company implement such events.
Additionally, the Company conducts outlook on future operation plan every half year, in which
the Company considers the conditions of maximum operation scale and negative reverse of market
condition, to ascertain every future indicator comply with relative regulations.
During the reporting period, the Company did not have any risk control indicator such as net capital
that exceeded regulatory standards.
F-199
470 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities
Some of the Group’s financial assets and liabilities are measured at fair value for financial reporting
purposes. The board of directors of the Group has set up certain process to determine the appropriate
valuation techniques and inputs for fair value measurements. The appropriateness of the process and
the determination of fair value are reviewed by the board of directors periodically.
The fair value of financial assets and financial liabilities are determined as follows:
The fair value of financial assets with standard terms and conditions and traded in active liquid
markets are determined with reference to quoted market bid prices;
The fair value of derivative instruments is calculated using quoted prices. Where such prices are
not available, fair value is determined by discounted cash flow analysis using the applicable yield
curve for the duration of the instruments for non-optional derivatives, and option pricing models
for optional derivatives;
The fair value of other financial assets and financial liabilities (excluding those described above)
is determined in accordance with generally accepted pricing models based on discounted cash
flow analysis, market comparison approach, etc.
The Group uses valuation techniques to determine the fair value of financial instruments when it is
unable to obtain the open market quotation in active markets.
The main parameters used in valuation techniques for financial instruments held by the Group include
bond prices, interest rates, foreign exchange rates, equity and stocks prices, volatilities, correlations,
early repayment rates, counterparty credit spreads and others, which are all observable and obtainable
from open market.
Management determines the fair value of the Group’s level 3 financial instruments using a variety of
techniques, including examining correlations of these fair values with macro-economic factors, engaging
external values, and using valuation models that incorporate unobservable inputs such as loss coverage
ratios. The fair value measurement of these instruments will not change significantly if changing one or
more of the unobservable inputs to reflect reasonably possible alternative assumptions. The Group has
established internal control procedures to control the Group’s exposure to such financial instruments.
F-200
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 471
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Financial instruments not measured at fair value
The table below summarises the carrying amounts and expected fair values with obvious variances of
those financial assets and liabilities not presented on the Group’s consolidated statement of financial
position at their fair values
As at 31 December 2021 As at 31 December 2020
Carrying Carrying
amount Fair value amount Fair value
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets
Debt instruments at amortised cost 4,725,209 4,310,574 3,763,499 3,764,352
Financial liabilities
Non-convertible bonds payable 163,586,070 170,269,519 147,838,210 161,831,219
The fair values of the financial assets and financial liabilities included in the level 2 categories above
have been determined in accordance with generally accepted pricing models based on a discounted
cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk
of counterparties.
Except for the above, the directors of the Company consider that the carrying amounts of financial
assets and financial liabilities recorded at amortised cost in the Group’s statements of financial position
approximate their fair values.
Financial instruments measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3.
For Level 1 financial instruments, fair values are unadjusted quotes in active markets for identical assets.
For Level 2 financial instruments, valuations are generally calculated based on the fair value of the
underlying investments which are debt securities or publicly traded equity instruments in each portfolio
or obtained from third party pricing services agent such as China Central Depository & Clearing Co.,
Ltd. which are based on the discounted cash flow models, recent transaction prices or other valuation
techniques in which all significant inputs are directly or indirectly observable from market data.
For Level 3 financial instruments, the management obtains valuation quotations from counterparties
or uses valuation techniques to determine the fair value, including discounted cash flow analysis, net
asset value, market comparison approach and option pricing model, etc. The fair value of these financial
instruments may be based on unobservable inputs which may have significant impact on the valuation
of these financial instruments, and therefore, these assets and liabilities have been classified by the
Group as level 3. The unobservable inputs which may have impact on the valuation include weighted
average cost of capital, liquidity discount, price to book ratio, etc.
F-201
472 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Financial instruments measured at fair value on a recurring basis (Continued)
The following table presents financial assets and financial liabilities measured at fair value as at 31
December 2021 and 31 December 2020.
Level 1 Level 2 Level 3 Total
As at 31 December 2021
Financial assets at fair value through
profit or loss
– Debt securities 698,881 110,654,910 5,731,526 117,085,317
– Equity securities 15,103,142 579,055 19,272,727 34,954,924
– Funds 3,261,745 42,982,623 2,381,450 48,625,818
– Others – 16,473,762 3,269,928 19,743,690
Debt instruments at fair value
through other comprehensive
income 927,858 34,837,660 1,287,427 37,052,945
Equity instruments at fair value
through other comprehensive
income 9,858,079 – 388,792 10,246,871
Derivative financial assets 59,072 735,177 290,482 1,084,731
29,908,777 206,263,187 32,622,332 268,794,296
Financial liabilities at fair value
through profit or loss
– Financial liabilities held for
trading 425,338 1,957,132 – 2,382,470
– Designated as financial
liabilities at fair value
through profit or loss – 13,488,046 445,701 13,933,747
Derivative financial liabilities 44,520 884,578 619,218 1,548,316
469,858 16,329,756 1,064,919 17,864,533
F-202
HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 473
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Financial instruments measured at fair value on a recurring basis (Continued)
Level 1 Level 2 Level 3 Total
As at 31 December 2020
Financial assets at fair value through
profit or loss
– Debt securities 1,867,103 102,164,519 6,332,071 110,363,693
– Equity securities 16,920,018 1,244,510 13,076,667 31,241,195
– Funds 3,341,594 47,964,019 1,894,560 53,200,173
– Others – 20,752,826 4,838,617 25,591,443
Debt instruments at fair value
through other comprehensive
income 252,156 9,756,368 3,099,639 13,108,163
Equity instruments at fair value
through other comprehensive
income 84,314 15,887,830 267,043 16,239,187
Derivative financial assets 17,602 1,819,411 899 1,837,912
22,482,787 199,589,483 29,509,496 251,581,766
Financial liabilities at fair value
through profit or loss
– Financial liabilities held for
trading 494,797 3,917,272 – 4,412,069
– Designated as financial liabilities
at fair value through
profit or loss – 27,494,403 331,830 27,826,233
Derivative financial liabilities 42,732 2,615,053 14,494 2,672,279
537,529 34,026,728 346,324 34,910,581
F-203
474 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Reconciliation of Level 3 fair value measurements of financial assets and financial liabilities
31 December 2021
Financial assets Financial
at fair value Equity Debt liabilities at fair
through instruments instruments value through Derivative
profit or loss at FVTOCI at FVTOCI profit or loss instruments
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2020 and
1 January 2021 26,158,747 267,042 3,099,639 331,830 (13,595)
Transfer in 3,205,928 – – 956,179 140
Purchase/(Disposal) 2,397,401 490 (2,322,403) 31,720 –
Transfer out (3,111,053) – (27,393) (324,149) –
Other losses and gains 2,004,608 121,260 537,584 (549,879) (315,281)
As at 31 December 2021 30,655,631 388,792 1,287,427 445,701 (328,736)
31 December 2020
Financial assets Financial
at fair value Equity Debt liabilities at fair
through instruments instruments value through Derivative
profit or loss at FVTOCI at FVTOCI profit or loss instruments
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2019 and
1 January 2020 9,158,764 266,099 1,193,001 354,620 (27,331)
Transfer in 11,970,811 – 1,238,661 – –
Purchase/(Disposal) 4,844,708 – 596,173 – 382
Transfer out (491,560) – – – –
Other losses and gains 676,024 943 71,804 (22,790) 13,354
As at 31 December 2020 26,158,747 267,042 3,099,639 331,830 (13,595)
In 2021 and 2020, the amounts of financial instruments measured at fair value transferred between
level 1 and level 2 were not significant.
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HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share) 475
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
77. TRANSFER OF FINANCIAL ASSETS
Asset-backed securities
The Group enters into securitization transactions in the normal course of business by which it transfers
advances to customers on margin financing, finance lease receivables, and receivables arising from sale
and leaseback arrangements to structured entities which issue asset-backed securities to investors. As
the Group holds all the junior tranches asset-backed securities, substantially all the risks and rewards of
ownership of the transferred assets are retained, so the Group continues to recognise the transferred
asset in its entirety and recognises bonds payable for the consideration received.
As at 31 December 2021, the Group has no advances to customers on margin financing that have been
transferred but not derecognised (as at 31 December 2020, Nil).
As at 31 December 2021, the carrying amount of finance lease receivables and receivables arising from
sale and leaseback arrangements that have been transferred but not derecognised was RMB9,338 million
(as at 31 December 2020: RMB10,467 million).
Asset-backed notes
The Group enters into securitization transactions in the normal course of business by which it transfers
finance lease receivables and receivables arising from sale and leaseback arrangements to structured
entities which issue asset-backed notes to investors. As the Group holds all the junior tranches asset-
backed notes, substantially all the risks and rewards of ownership of the transferred assets are retained,
so the Group continues to recognise the transferred asset in its entirety and recognises bonds payable
for the consideration received.
As at 31 December 2021, the carrying amount of finance lease receivables and receivables arising from
sale and leaseback arrangements that have been transferred but not derecognised was RMB2,276 million
(as at 31 December 2020: RMB1,076 million).
78. AUDITORS’ REMUNERATION
2021 2020
RMB’000 RMB’000
Annual audit fee for the Company 4,906 3,453
Other subsidiaries’ audit fees 23,349 20,788
28,255 24,241
F-205
476 HAITONG SECURITIES CO., LTD. | Annual Report 2021 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
79. SUBSEQUENT EVENTS
According to the 25th meeting of the 7th board of directors of the Company held on 29 March 2022,
the board of directors proposed to declare a dividend of RMB3.00 (tax included) per 10 shares in 2021
to all shareholders, with a total amount of RMB3,919 million (tax included) to be paid in cash. The profit
distribution proposal has yet to be deliberated and approved by the general meeting of shareholders.
Except for the above disclosures, no material events have occurred with the Company from 31 December
2021 to the date of this report.
F-206
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 283
Independent Auditor’s Report
To the Shareholders of
Haitong Securities Co., Ltd.
(Incorporated in the People’s Republic of China with limited liability)
OPINION
What we have audited
The consolidated financial statements of Haitong Securities Co., Ltd. (the “Company”) and its subsidiaries
(the “Group”), which are set out on pages 292 to 488, comprise:
the consolidated statement of financial position as at 31 December 2022;
the consolidated statement of profit or loss for the year then ended;
the consolidated statement of total comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2022, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards
(“IFRSs”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong
Companies Ordinance.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with the International Code of Ethics for Professional
Accountants (including International Independence Standards) issued by the International Ethics Standards
Board for Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance
with the IESBA Code.
F-207
284 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
Independent Auditor’s Report
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the consolidated financial statements of the current period. These matters were addressed in the context
of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key audit matters identified in our audit are summarised as follows:
Provision of expected credit loss for advances to customers on margin financing, financial assets held
under resale agreements, finance lease receivables and receivables arising from sale and leaseback
arrangements
Consolidation of structured entities
Valuation of financial assets at fair value through profit or loss and debt instruments at fair value
through other comprehensive income classified as Level 3 Financial Instruments
Key Audit Matter How our audit addressed the Key Audit Matter
(1) Provision of expected credit loss (“ECL”) We obtained an understanding of Management’s
for advances to customers on margin assessment process of ECL for advances to customers
financing, financial assets held under resale on margin financing, financial assets held under resale
agreements, finance lease receivables and agreements, finance lease receivables and receivables
receivables arising from sale and leaseback arising from sale and leaseback arrangements. We
arrangements: assessed the inherent risk of material misstatement
by considering the degree of estimation uncertainty
Refer to Notes 26, 27, 32 and 40 to the consolidated and other inherent risk factors such as complexity,
financial statements. subjectivity and sensitivity to potential material
misstatement caused by management bias or fraud
As at 31 December 2022, advances to customers on in the estimation.
margin financing, financial assets held under resale
agreements, finance lease receivables and receivables We evaluated and tested the Group’s internal controls
arising from sale and leaseback arrangements are relating to the measurement of ECL for the aforesaid
RMB70,027 million, RMB33,210 million, RMB21,048 financial assets, which included:
million and RMB85,735 million respectively, with
credit impairment loss allowance of RMB2,183 (i) Governance over ECL models, including the
million, RMB565 million, RMB1,590 million, and selection and approval of methodologies and
RMB1,185 million provided accordingly. The credit models; and the ongoing monitoring and fine
impairment losses for the aforesaid financial assets tuning of such models;
recognized in the consolidated statement of profit or
loss of the Group for the year ended 31 December
2022 is RMB1,183 million.
The credit loss allowances as at 31 December
2022 for the aforesaid financial assets represented
Management’s best estimates of the ECL in
accordance with International Financial Reporting
Standard 9: “Financial Instruments”.
F-208
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Independent Auditor’s Report
Key Audit Matter How our audit addressed the Key Audit Matter
(1) Provision of expected credit loss (“ECL”) (ii) Review and approval of significant management
for advances to customers on margin judgements and assumptions, including the
financing, financial assets held under resale criteria for SICR, credit default and credit
agreements, finance lease receivables and impairment; and the use of economic indicators
receivables arising from sale and leaseback for forward-looking measurement, and relative
arrangements: (continued) weighting for forward-looking scenarios;
Management applied a three-stage impairment (iii) Internal controls over the completeness and
model to calculate the ECL for the aforesaid financial accuracy of key data inputs used by the
assets. For financial assets classified under Stages 1 models.
and 2, Management assessed credit loss allowances
using the risk parameter modelling approach that In addition, we also performed the following
incorporated key parameters, including exposure at procedures:
default and probability of default or loss rate after
taking into consideration forward looking factors. For (i) We examined the ECL modelling methodologies
credit-impaired financial assets classified under Stage and assessed their reasonableness. We
3, Management assessed the credit loss allowance also examined the calculation for model
by estimating the future cash flows after taking into measurement on a sample basis, to test
consideration forward looking factors. whether or not the models reflect the
modelling methodologies documented by
Management assesses the credit allowances for the Management;
aforesaid financial assets at each reporting date.
The measurement model for ECL involves significant (ii) We examined on a sample basis, the quantity,
management judgements and assumptions, primarily nature and fair value of the collateral under
including: advances to customers on margin financing and
financial assets held under resale agreements
(i) Selection of the appropriate models and with further reviews on the collateral ratio
parameters; and the backstop past due days defined by
Management; examined on a sample basis
(ii) Determination of the criteria for significant finance lease receivables and receivables arising
increase in credit risk (“SICR”), credit defaults from sale and leaseback arrangements, with
and credit impairment; further reviews on the credit analysis performed
by Management based on the operating and
(iii) Projection of macroeconomic variables for financial information of the debtors, type
forward looking scenarios and probability of collaterals or guarantors; evaluated the
weightings. appropriateness of the determination of the
criteria for the SICR, credit default and credit
The Group has established governance processes and impairment for these financial assets;
controls over the measurement of ECL.
F-209
286 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
Independent Auditor’s Report
Key Audit Matter How our audit addressed the Key Audit Matter
(1) Provision of expected credit loss (“ECL”) (iii) We examined major data inputs to the ECL
for advances to customers on margin models on a sample basis, including exposure
financing, financial assets held under resale at default and probability of default or loss rate
agreements, finance lease receivables and after taking into consideration forward looking
receivables arising from sale and leaseback factors. For forward-looking measurement,
arrangements: (continued) we used statistical methods to evaluate
Management’s selection of economic indicators
The Group applied significant management and their correlation analysis with credit risk
judgements in measuring the ECL and the amounts portfolios. We assessed the reasonableness
involved were significant to the Group’s financial of the predictive economic indicators and
statements. This led to this matter being identified performed sensitivity analysis of economic
as a key audit matter. indicators and weightings;
(iv) For credit-impaired assets under Stage 3,
we examined, on a sample basis, forecasted
future cash flows prepared by Management
based on financial information of borrowers
and guarantors, latest collateral valuations
and other available information together with
discount rates in supporting the computation
of credit impairment loss allowance.
Based on the procedures performed, the models, key
parameters, significant judgements and assumptions
adopted by Management in the provision of ECL
for these assets and the measurement results were
considered acceptable.
F-210
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Independent Auditor’s Report
Key Audit Matter How our audit addressed the Key Audit Matter
(2) Consolidation of structured entities: Our procedures in relation to the assessment of the
consolidation scope of structured entities included:
Refer to Note 69 Interest in Consolidated Structured
Entitles to the consolidated financial statements. We evaluated and tested the effectiveness of key
controls of Management related to the consolidation
The Group acted as asset manager for, or invested in, of structured entities.
a number of structured entities.
We examined, on a sample basis, the contracts
Management made significant judgements when from the Group’s asset management and investment
concluding on whether the Group controlled, and portfolio to assess the extent of power the Group
therefore should consolidate these structured entities. had over its structured entities; the Group’s exposure
or rights to variable returns from its involvement
Management has determined that the Group had with those structured entities; and the relationship
control of certain structured entities based on their between the Group’s power and returns with respect
assessment of the Group’s power over the entities, to the structured entities.
its exposure to variable returns from its involvement
with those entities and its ability to use its power We traced, on a sample basis, the data used by
to affect the amount of its returns from these Management in the quantitative assessment of
structured entities. The aggregated assets of all the Group’s variable return exposures back to the
consolidated structured entities directly held by the applicable contracts and other supporting financial
Group amounted to RMB36,713 million as at 31 information, and re-performed the mathematical
December 2022. computations to examine the accuracy of the Group’s
variable return exposures.
The significant judgements exercised by Management
in assessing whether the Group had control over the Based on the procedures performed above, the
structured entities and the amount of such structured judgements made by Management when concluding
entities on the consolidated statement of financial the structured entities for consolidation were
position of the Group resulted in this matter being considered acceptable.
identified as a key audit matter.
F-211
288 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
Independent Auditor’s Report
Key Audit Matter How our audit addressed the Key Audit Matter
(3) Valuation of financial assets at fair value We obtained an understanding of Management’s
through profit or loss (“FVTPL”) and debt process of valuation of Level 3 Financial Instruments
instruments at fair value through other and assessed the inherent risk of material
comprehensive income (“debt instruments misstatement by considering the degree of estimation
at FVTOCI”) classified as Level 3 Financial uncertainty and other inherent risk factors such
Instruments: as complexity, subjectivity involved and sensitivity
to potential material misstatements caused by
Refer to Note 76 Financial Risk Management to the management bias or fraud in the estimation.
consolidated financial statements
We evaluated and tested the design and the operating
As at 31 December 2022, the Group’s FVTPL and effectiveness of the Group’s internal controls over the
debt instruments at FVTOCI classified as Level 3 use, data input and ongoing fine-tuning of valuation
financial instrument in the fair value hierarchy (“Level models and critical estimates for the valuation of
3 Financial Instruments”), were RMB46,173 million these Level 3 Financial Instruments.
and RMB843 million, respectively. The fair value of
these Level 3 Financial Instruments was measured We evaluated the appropriateness of the models used
using valuation techniques that involve significant by Management for the valuation of Level 3 Financial
inputs that were not based on observable market Instruments based on our knowledge of current
data. These unobservable inputs included liquidity industry practice.
discounts, risk adjusted discount rates, adjusted
volatility and market multipliers, etc. We also evaluated, on a sample basis, the
reasonableness of the significant assumptions
Valuation of the FVTPL and debt instruments at and the accuracy of the unobservable inputs used
FVTOCI classified as Level 3 Financial Instruments for measuring the fair value of Level 3 Financial
was identified as a key audit matter given the size Instruments with reference to relevant market data.
and the significant judgements required in the
use of valuation models, critical assumptions and We performed, on a sample basis, an independent
unobservable inputs in the valuation process of these valuation of the Level 3 Financial Instruments and
Level 3 Financial Instruments. compared our results with the Group’s valuation
results.
Based on the procedures performed above, the
valuation models and inputs used in the valuation of
Level 3 Financial Instruments by Management were
considered acceptable.
F-212
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Independent Auditor’s Report
OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises all
of the information included in the annual report other than the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE
FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements
that give a true and fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not
assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
F-213
290 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
Independent Auditor’s Report
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
F-214
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 291
Independent Auditor’s Report
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Jack Li.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 30 March 2023
F-215
292 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
Notes 2022 2021
Revenue
– Commission and fee income 6 14,668,674 18,762,734
– Interest income 7 17,514,777 15,625,976
– Finance lease income 7 2,302,792 3,336,406
– Investment income and gains (net) 8 (1,034,439) 10,678,856
33,451,804 48,403,972
Other income and gains 9 8,528,417 9,405,589
Total revenue, gains and other income 41,980,221 57,809,561
Commission and fee expenses 10 (3,083,635) (3,770,637)
Interest expenses 11 (13,607,710) (12,341,619)
Depreciation and amortisation 12 (1,581,428) (1,569,341)
Staff costs 13 (5,785,269) (9,025,250)
Impairment losses under expected credit loss model 14 (1,665,649) (3,351,674)
Impairment losses on other assets 15 (65,121) (499,168)
Other expenses 16 (8,978,954) (10,357,962)
Total expenses (34,767,766) (40,915,651)
Share of results of associates and joint ventures 786,581 1,649,889
Profit before income tax 7,999,036 18,543,799
Income tax expense 17 (2,802,886) (4,795,937)
Profit for the year 5,196,150 13,747,862
Attributable to:
Shareholders of the Company 6,545,347 12,826,517
Non-controlling interests (1,349,197) 921,345
5,196,150 13,747,862
Earnings per share (Expressed in RMB per share)
– Basic 18 0.50 0.98
– Diluted 18 0.50 0.98
F-216
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 293
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2022 2021
Profit for the year 5,196,150 13,747,862
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains on defined benefit obligations 80,357 39,131
Fair value losses on equity instruments measured at fair value
through other comprehensive income (1,553,088) (446,507)
Income tax impact 320,322 108,150
Subtotal (1,152,409) (299,226)
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 563,156 (739,071)
Fair value gains on hedging instrument designated in cash flow hedges 45,520 94,909
Fair value gains on hedges of net investments in foreign operations 611,247 243,987
Fair value (losses)/gains on debt instruments measured at fair value
through other comprehensive income
– Net fair value changes during the year (110,934) 270,696
– Reclassification adjustment to profit or loss on disposal (83,883) 82,732
– Reclassification adjustment to profit or loss for expected credit loss (63,908) 83,512
– Income tax relating to components of other comprehensive income 43,913 (86,644)
Share of other comprehensive income of associates and joint ventures,
net of related income tax 8,336 (2,193)
Subtotal 1,013,447 (52,072)
Other comprehensive income for the year (net of tax) (138,962) (351,298)
Total comprehensive income for the year 5,057,188 13,396,564
Attributable to:
Shareholders of the Company 5,285,587 12,932,504
Non-controlling interests (228,399) 464,060
5,057,188 13,396,564
Total comprehensive income for the period attributable to
shareholders of the company arises from:
Continuing operations 5,052,909 13,396,313
Discontinued operations 4,279 251
5,057,188 13,396,564
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294 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
31 December 31 December
Notes 2022 2021
Non-current assets
Property and equipment 19 17,016,634 15,088,876
Right-of-use assets 20 1,710,529 1,778,639
Investment properties 21 2,641,590 57,595
Goodwill 22 3,676,231 3,365,313
Other intangible assets 23 570,006 531,391
Investments accounted for using equity method 25 7,013,714 6,454,420
Finance lease receivables 26 7,102,583 11,270,189
Receivables arising from sale and leaseback arrangements 27 47,847,820 31,521,846
Equity instruments at fair value through other comprehensive
income 28 6,096,319 10,246,871
Debt instruments at fair value through other comprehensive
income 29 45,975,346 33,050,889
Debt instruments measured at amortised cost 30 5,437,086 3,626,108
Financial assets at fair value through profit or loss 31 25,043,377 25,132,195
Financial assets held under resale agreements 32 50,071 575,403
Other loans and receivables 33 2,518,564 2,394,396
Loans and advances 34 5,031,733 4,119,086
Deferred tax assets 35 4,709,952 5,171,925
Deposits with exchanges 36 199,937 163,245
Restricted bank balances and cash 37 1,769,482 1,503,454
Other non-current assets 39 3,101,022 1,891,358
Total non-current assets 187,511,996 157,943,199
Current assets
Advances to customers on margin financing 40 67,843,871 75,223,404
Accounts receivable 41 10,394,515 11,372,016
Finance lease receivables 26 12,355,870 22,202,398
Receivables arising from sale and leaseback arrangements 27 36,702,132 23,566,177
Debt instruments at fair value through other comprehensive
income 29 6,876,553 4,002,056
Debt instruments measured at amortised cost 30 369,071 1,099,101
Financial assets at fair value through profit or loss 31 184,555,352 195,277,554
Derivative financial assets 42 1,477,167 1,084,731
Financial assets held under resale agreements 32 32,595,078 39,185,614
Other loans and receivables 33 4,209,604 12,544,269
Loans and advances 34 837,281 593,565
Other current assets 43 6,748,623 6,242,087
Placements to banks and other financial institutions 44 274,445 352,928
Deposits with exchanges 36 22,664,637 17,491,923
Clearing settlement funds 45 21,380,695 16,765,418
Deposits with central banks 46 3,245,096 3,304,209
Deposits with other banks 46 172,872 226,337
Bank balances and cash 37 153,392,719 156,448,163
Total current assets 566,095,581 586,981,950
Total assets 753,607,577 744,925,149
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HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 295
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
31 December 31 December
Notes 2022 2021
Current liabilities
Borrowings 47 56,864,912 48,402,335
Short-term financing bills payables 48 16,159,094 24,986,688
Bonds payable 49 60,153,220 52,513,925
Accounts payable to brokerage clients 50 115,513,463 123,202,200
Customer accounts 51 3,784,565 2,758,837
Contract liabilities 52 25,969 156,746
Other payables and accruals 53 21,262,810 28,635,826
Lease liabilities 20 279,881 307,759
Provisions 54 201,705 203,800
Income tax liabilities 1,727,757 3,477,590
Financial liabilities at fair value through profit or loss 55 5,478,358 10,456,105
Derivative financial liabilities 42 898,419 1,548,316
Financial assets sold under repurchase agreements 56 101,694,357 91,911,952
Placements from banks and other financial institutions 57 3,218,363 12,723,438
Deposits from central banks 2,133,219 155,411
Deposits from other banks 58 – 72,787
Total current liabilities 389,396,092 401,513,715
Net current assets 176,699,489 185,468,235
Total assets less current liabilities 364,211,485 343,411,434
Non-current liabilities
Long-term payables 63 5,508,164 6,230,344
Deferred tax liabilities 35 909,459 1,320,651
Customer accounts 51 1,533,910 3,185,654
Long-term borrowings 47 33,951,333 30,751,726
Bonds payable 49 121,677,698 111,072,145
Deposits from central banks 81,911 2,150,202
Other payables and accruals 53 1,723,273 1,405,175
Financial liabilities at fair value through profit or loss 55 17,410,122 5,860,112
Lease liabilities 20 735,819 739,420
Placements from banks and other financial institutions 57 3,057,738 2,941,219
Total non-current liabilities 186,589,427 165,656,648
Total liabilities 575,985,519 567,170,363
F-219
296 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
31 December 31 December
Notes 2022 2021
Equity
Share capital 59 13,064,200 13,064,200
Capital reserve 75,007,559 74,913,916
Revaluation reserve 60 (624,143) 305,179
Translation reserve (993,170) (962,857)
General reserves 61 31,438,374 28,313,210
Retained earnings 61 46,699,137 47,504,316
Equity attributable to shareholders the company 164,591,957 163,137,964
Non-controlling interests 13,030,101 14,616,822
Total equity 177,622,058 177,754,786
Total equity and liabilities 753,607,577 744,925,149
The consolidated financial statements on pages 292 to 488 were approved and authorised for issue by the
Board of Directors on 30 March 2023 and signed on its behalf by:
Zhou Jie Li Jun Zhang Xinjun
Chairman of Board Executive Director and Chief Financial Officer
General Manager
F-220
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 297
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
Attributable to shareholders of the Company
Capital Non-
Share Reserve Revaluation Translation General Retained controlling Total
capital (Note) reserves reserve reserve earnings Total interests equity
As at 1 January 2022 13,064,200 74,913,916 305,179 (962,857) 28,313,210 47,504,316 163,137,964 14,616,822 177,754,786
Profit for the year – – – – – 6,545,347 6,545,347 (1,349,197) 5,196,150
Other comprehensive income
for the year – – (1,229,447) (30,313) – – (1,259,760) 1,120,798 (138,962)
Total comprehensive income
for the year – – (1,229,447) (30,313) – 6,545,347 5,285,587 (228,399) 5,057,188
Other equity instruments
issued by a subsidiary
(Note 62) – – – – – – – 202,009 202,009
Appropriation to general reserve – – – – 3,125,164 (3,125,164) – – –
Cash dividend recognised as
distribution (Note 67) – – – – – (3,919,260) (3,919,260) – (3,919,260)
Distribution to non-controlling
interests and other equity
instruments holders – – – – – – – (368,138) (368,138)
Share-based payments of
a subsidiary – 23,914 – – – – 23,914 11,297 35,211
Disposal of equity instruments
at fair value through other
comprehensive income – – 300,125 – – (300,125) – – –
Changes in non-controlling
interests – 69,729 – – – – 69,729 (1,198,171) (1,128,442)
Others – – – – – (5,977) (5,977) (5,319) (11,296)
As at 31 December 2022 13,064,200 75,007,559 (624,143) (993,170) 31,438,374 46,699,137 164,591,957 13,030,101 177,622,058
F-221
298 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
Attributable to shareholders of the Company
Capital Non-
Share Reserve Revaluation Translation General Retained controlling Total
capital (Note) reserves reserve reserve earnings Total interests equity
As at 1 January 2021 13,064,200 74,888,284 282,378 (932,948) 24,924,156 41,222,398 153,448,468 14,677,844 168,126,312
Profit for the year – – – – – 12,826,517 12,826,517 921,345 13,747,862
Other comprehensive income for
the year – – 135,896 (29,909) – – 105,987 (457,285) (351,298)
Total comprehensive income
for the year – – 135,896 (29,909) – 12,826,517 12,932,504 464,060 13,396,564
Other equity instruments issued by
a subsidiary (Note 62) – – – – – – – 811,512 811,512
Appropriation to general reserve – – – – 3,389,054 (3,389,054) – – –
Cash dividend recognised as
distribution (Note 67) – – – – – (3,266,050) (3,266,050) – (3,266,050)
Distribution to non-controlling
interests and other equity
instruments holders – – – – – – – (729,896) (729,896)
Share-based payments of a
subsidiary – 9,356 – – – – 9,356 99,710 109,066
Disposal of equity instruments
at fair value through other
comprehensive income – – (113,095) – – 113,095 – – –
Changes in non-controlling
interests – 16,276 – – – – 16,276 (705,169) (688,893)
Others – – – – – (2,590) (2,590) (1,239) (3,829)
As at 31 December 2021 13,064,200 74,913,916 305,179 (962,857) 28,313,210 47,504,316 163,137,964 14,616,822 177,754,786
Note: Capital reserve of the Group represents primarily (i) the share premium arisen from the issuance of the Company’s
shares, and (ii) the difference between the considerations paid over the proportionate share of net assets attributable
to the acquisition of additional interests in subsidiaries.
F-222
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 299
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2022 2021
OPERATING ACTIVITIES
Profit before income tax 7,999,036 18,543,799
Adjustments for
Interest expenses 13,607,710 12,341,619
Share of results of associates and joint ventures (786,581) (1,649,889)
Depreciation and amortisation 1,581,428 1,569,341
Impairment losses under expected credit loss model 1,665,649 3,351,674
Impairment losses of other assets 65,121 499,168
Share-based payment of a subsidiary 23,914 109,065
Losses on disposal of property and equipment and
other intangible assets 10,715 12,734
Foreign exchange losses/(gains), net 425,400 (279,938)
Interest income from debt instruments at fair value through
other comprehensive income (1,415,566) (839,666)
Interest income from debt instruments measured at amortised cost (119,188) (64,274)
Dividend income arising from equity instruments at fair value
through other comprehensive income (156,024) (1,195,069)
Net gains arising from debt instruments at fair value through
other comprehensive income (193,643) (620,788)
Net realised (gains)/losses arising from financial assets at
fair value through profit or loss (1,427,239) 1,068,863
Fair value change of financial instruments at fair value
through profit or loss 3,056,495 (290,515)
Operating cash flows before movements in working capital 24,337,227 32,556,124
F-223
300 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2022 2021
Increase in finance lease receivables and receivables arising from sale and
leaseback arrangements (17,079,642) (6,313,223)
Decrease in financial assets at fair value through profit or loss and
derivative financial assets 7,817,801 3,397,337
Decrease in financial assets held under resale agreements 6,850,350 14,489,244
Decrease in other loans and receivables 7,825,066 4,660,945
Increase in loans and advances (1,170,068) (797,145)
Decrease/(Increase) in advances to customers on margin financing 6,870,676 (2,617,227)
Increase in accounts receivables and other current assets (1,323,711) (5,818,500)
Decrease/(Increase) in placements to banks and other financial institutions 84,949 (333,000)
Increase in deposits with exchanges (5,209,406) (280,317)
Decrease in deposit with central banks 6,277 8,881
Increase in restricted bank deposits (352,305) (335,342)
Decrease/(Increase) in cash held on behalf of clients 8,737,205 (17,775,373)
(Decrease)/Increase in accounts payable to brokerage clients and other
payables and accruals (15,619,488) 20,873,033
(Decrease)/Increase in customer accounts (626,016) 1,531,103
(Decrease)/Increase in contract liabilities (130,777) 25,707
(Decrease)/Increase in provisions (7,042) 64,429
Increase/(Decrease) in financial liabilities at fair value through profit
or loss and derivative financial liabilities 6,976,906 (16,893,288)
Increase in financial assets sold under repurchase agreements 9,782,404 31,348,519
(Decrease)/Increase in placements from banks and other financial
institutions (9,388,557) 595,145
(Decrease)/Increase in deposit from central banks (90,483) 1,418,048
(Decrease)/Increase in deposit from other banks (72,787) 9,683
Cash from operations 28,218,579 59,814,783
Income taxes paid (6,493,838) (3,635,454)
Interest paid (3,931,718) (3,431,920)
Net cash inflow from operating activities 17,793,023 52,747,409
F-224
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 301
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2022 2021
INVESTING ACTIVITIES
Dividends received from associates and other investments 465,822 334,540
Dividends received from equity instruments at fair value through other
comprehensive income 156,024 1,195,069
Interest from the debt instruments at fair value through other
comprehensive income and amortised cost 1,449,928 346,175
Purchases of property and equipment and other intangible assets (4,657,435) (1,799,247)
Disposal of a subsidiary 132,053 –
Proceeds on disposal of property and equipment 3,101 455,196
Cash paid for investments accounted for using equity method (889,182) (1,398,675)
Proceeds from partial disposal of associates and joint ventures 658,983 685,719
Purchases of
Debt instruments at fair value through other comprehensive income (43,590,974) (30,272,325)
Financial assets at fair value through profit or loss (2,478,800) (3,774,445)
Equity instruments at fair value through other comprehensive income (2,000,033) (4,794,583)
Debt instruments measured at amortised cost (2,085,308) (2,443,311)
Proceeds from disposal of
Equity instruments at fair value through other comprehensive income 4,992,803 10,886,498
Debt instruments at fair value through other comprehensive income 27,903,195 5,457,106
Debt instruments measured at amortised cost 1,024,768 1,836,516
Financial assets at fair value through profit or loss 3,631,547 2,348,936
Net cash outflow from investing activities (15,283,508) (20,936,831)
F-225
302 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2022 2021
FINANCING ACTIVITIES
Dividends paid (4,178,845) (3,931,210)
Proceeds from issuance of subsidiaries’ shares 3,915 31,298
Payments on capital returned to non-controlling shareholders (1,073,544) –
Borrowings raised 71,594,305 53,066,260
Interest paid for borrowings and bonds (9,110,155) (8,360,887)
Interest paid for perpetual notes (108,553) (64,736)
Issuance cost paid for short-term bonds, non-convertible bonds and others (144,235) (268,863)
Repayment of lease liabilities (415,180) (506,791)
Repayment of borrowings, short-term bonds, non-convertible bonds
and others (155,278,389) (177,742,005)
Proceeds from share issued upon exercise of share options of a subsidiary – 2,506
Proceeds from non-convertible bonds and short-term financing
bills payables 104,859,198 126,612,630
Purchase of shares held under the share award scheme (15,231) –
Net cash inflow/(outflow) from financing activities 6,133,286 (11,161,798)
Net increase in cash and cash equivalents 8,642,801 20,648,780
Effect of exchange rate changes on cash and cash equivalents 1,182,232 (250,989)
Cash and cash equivalents at the beginning of period 57,705,067 37,307,276
Cash and cash equivalents at the end of period (Note 38) 67,530,100 57,705,067
F-226
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 303
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
1. GENERAL INFORMATION
Haitong Securities Co., Ltd. (the “Company”) was transformed from Shanghai Haitong Securities
Company ( ), which was established in 1988, to a limited liability company upon the
authorisation by the People’s Bank of China in September 1994 and changed its name to
. In December 2001, the Company was further transformed to a joint-stock company upon the
approval from China Securities Regulatory Commission (the “CSRC”). In January 2002, the Company
changed its name from to Haitong Securities Co., Ltd. ( ). In
June 2007, the Company’s merger with former Shanghai Urban Agro-Business Co., Ltd. (
) was approved by the CSRC, and was listed on the Shanghai Stock Exchange in July
in the same year. After its listing, its name was changed to “Haitong Securities”. On 27 April 2012,
the Company issued H shares which were listed on the Main Board of The Stock Exchange of Hong
Kong Limited (the “Hong Kong Stock Exchange”).
The address of the Company’s registered office is Haitong Securities Building, No. 689 Guangdong
Road, Shanghai, China, while the address of the Company’s headquarter is Haitong Bund Finance Plaza,
No. 888 South Zhongshan Road, Shanghai, China.
The Company are principally engaged in securities brokerage; proprietary securities activities; securities
underwriting and sponsorship; securities investment advisory; financial consultancy related to securities
trading and investment activities; direct equity investments; securities investment fund distribution;
introducing brokerage business for futures companies; margin financing and securities lending; agency
sale of financial products; stock option market-making. The consolidated financial statements are
presented in Renminbi (“RMB”), which is also the functional currency of the Company.
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS
For the purpose of preparing and presenting the consolidated financial statements, the Group has
applied the following new and amendments to International Financial Reporting Standards (“IFRSs”)
issued by the International Accounting Standards Board (“IASB”) which are relevant to the Group for
the first time in the current year:
2.1. New and amended standards adopted by the Group
The Group has adopted the new and amended standards from 1 January 2022 in their first
interim financial statements:
(a) Amendments to IAS 16: Property, Plant and Equipment
(b) Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Asset
(c) Amendments to IFRS 3: Business Combinations
(d) Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41: Annual Improvements to IFRS Standards
(2018-2020 Annual Cycle)
F-227
304 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.1. New and amended standards adopted by the Group (Continued)
(a) Amendments to IAS16: Property, Plant and Equipment
Amendments to IAS 16, ‘Property, plant and equipment’ prohibit a company from
deducting from the cost of property, plant and equipment amounts received from selling
items produced while the company is preparing the asset for its intended use. Instead, a
company will recognise such sales proceeds and related cost in profit or loss. The adoption
of the amendments does not have a significant impact on the Group’s consolidated
financial statements.
(b) Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Asset
Amendments to IAS 37, ‘Provisions, contingent liabilities and contingent assets’ specify
which costs a company includes when assessing whether a contract will be loss-making.
The adoption of the amendments does not have a significant impact on the Group’s
consolidated financial statements.
(c) Amendments to IFRS 3: Business Combinations
Amendments to IFRS 3: ‘Business combinations’ update a reference in IFRS 3 to
the Conceptual Framework for Financial Reporting without changing the accounting
requirements for business combinations. The adoption of the amendments does not have
a significant impact on the Group’s consolidated financial statements.
(d) Annual Improvements to IFRS Standards 2018-2020
IFRS 1 First-time Adoption of International Financial Reporting Standards – allows entities
that have measured their assets and liabilities at carrying amounts recorded in their
parent’s books to also measure any cumulative translation differences using the amounts
reported by the parent. This amendment will also apply to associates and joint ventures
that have taken the same IFRS 1 exemption;
IFRS 9 Financial Instruments – clarifies which fees should be included in the 10% test for
derecognition of financial liabilities;
IFRS 16 Leases – amendment of illustrative example 13 to remove the illustration of
payments from the lessor relating to leasehold improvements, to remove any confusion
about the treatment of lease incentives;
IAS 41 Agriculture – removal of the requirement for entities to exclude cash flows for
taxation when measuring fair value under IAS 41. This amendment is intended to align
with the requirement in the standard to discount cash flows on a post-tax basis.
The adoption of the amendments does not have a significant impact on the Group’s
consolidated financial statements.
F-228
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 305
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.2. Impact of standards issued but not yet applied by the Group
The Group has not adopted the following new and amended standards that have been issued
but are not yet effective.
Effective for annual periods
beginning on or after
(a) IFRS 17 Insurance Contracts 1 January 2023
(b) Amendments to Classification of 1 January 2024
IAS 1 Liabilities as Current or
Non-current
(c) Amendments to Non-current Liabilities 1 January 2024
IAS 1 with Covenants
(d) Amendments to Disclosure of Accounting 1 January 2023
IAS 1 and IFRS Policies
Practice
Statement 2
(e) Amendments to Definition of Accounting 1 January 2023
IAS 8 Estimates
(f) Amendments to Deferred Tax related to 1 January 2023
IAS 12 Assets and
Liabilities arising from a
Single Transaction
(g) Amendments Sale or Contribution The amendments were originally intended
to IFRS 10 and of Assets between to be effective for annual periods
IAS 28 An Investor and Its beginning on or after 1 January 2016.
Associate or Joint The effective date has now been deferred.
Venture Early adoption of the amendments
continue to be permitted
(h) Amendments to Lease Liability in a Sale 1 January 2024
IFRS 16 and Leaseback
(a) Amendments to IFRS 17: Insurance Contracts
IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. It requires
a current measurement model where estimates are re-measured each reporting period.
Contracts are measured using the building blocks of: discounted probability-weighted cash
flows, an explicit risk adjustment, and a contractual service margin (“CSM”) representing
the unearned profit of the contract which is recognised as revenue over the coverage
period. The new rules will affect the financial statements and key performance indicators
of all entities that issue insurance contracts or investment contracts with discretionary
participation features. The Group anticipates that the adoption of the amendments will
not have a significant impact on the Group’s consolidated financial statements.
F-229
306 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.2. Impact of standards issued but not yet applied by the Group (Continued)
(b) Amendments to IAS 1: Classification of Liabilities as Current or Non-current
These narrow-scope amendments to IAS 1, ‘Presentation of financial statements’, clarify
that liabilities are classified as either current or non-current, depending on the rights
that exist at the end of the reporting period. Liabilities are classified as non-current
if the entity has a substantive right to defer settlement for at least 12 months at the
end of the reporting period. The entity should assess the existence of the right on the
reporting date, whether the right will be enforced is out of consideration. The right to
defer only exists if the entity complies with any relevant conditions at the reporting date.
A liability is classified as current if a condition is breached at or before the reporting date
and a waiver is obtained after the reporting date. A loan is classified as non-current if a
covenant is breached after the reporting date. The Group anticipates that the adoption of
the amendments will not have a significant impact on the Group’s consolidated financial
statements.
(c) Amendments to IAS 1: Non-current Liabilities with Covenants
These amendments clarify that covenants of loan arrangements which an entity must
comply with only after the reporting date would not affect classification of a liability
as current or non-current at the reporting date. The 2022 amendments also introduce
additional disclosure requirements. When an entity classifies a liability arising from a loan
arrangement as non-current and that liability is subject to the covenants which an entity
is required to comply with within twelve months of the reporting date, the entity shall
disclose information in the notes, including the carrying amount of the liability, information
about the covenants, facts and circumstances, if any, that indicate the entity may have
difficulty complying with the covenants. The Group anticipates that the adoption of the
amendments will not have a significant impact on the Group’s consolidated financial
statements.
(d) Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting
Policies
The IASB amended IAS 1 to require entities to disclose their material rather than their
significant accounting policies. The amendments define what is ‘material accounting policy
information’ and explain how to identify when accounting policy information is material.
They further clarify that immaterial accounting policy information does not need to be
disclosed. If it is disclosed, it should not obscure material accounting information.
To support this amendment, the IASB also amended IFRS Practice Statement 2 Making
Materiality Judgements to provide guidance on how to apply the concept of materiality to
accounting policy disclosure. The Group anticipates that the adoption of the amendments
will not have a significant impact on the Group’s consolidated financial statements.
F-230
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 307
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.2. Impact of standards issued but not yet applied by the Group (Continued)
(e) Amendments to IAS 8: Definition of Accounting Estimates
The amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
clarifies how companies should distinguish changes in accounting policies from changes
in accounting estimates. The distinction is important, because changes in accounting
estimates are applied prospectively to future transactions and other future events, whereas
changes in accounting policies are generally applied retrospectively to past transactions and
other past events as well as the current period. The Group anticipates that the adoption of
the amendments will not have a significant impact on the Group’s consolidated financial
statements.
(f) Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from
a Single Transaction
The amendments to IAS 12 Income Taxes require companies to recognise deferred tax
on transactions that, on initial recognition, give rise to equal amounts of taxable and
deductible temporary differences. They will typically apply to transactions such as leases
of lessees and decommissioning obligations, and will require the recognition of additional
deferred tax assets and liabilities. The amendment should be applied to transactions that
occur on or after the beginning of the earliest comparative period presented. In addition,
entities should recognise deferred tax assets (to the extent that it is probable that they
can be utilised) and deferred tax liabilities at the beginning of the earliest comparative
period for all deductible and taxable temporary differences associated with:right-of-use
assets and lease liabilities, and decommissioning, restoration and similar liabilities, and
the corresponding amounts recognised as part of the cost of the related assets. The
cumulative effect of recognising these adjustments is recognised in retained earnings, or
another component of equity, as appropriate. The Group anticipates that the adoption of
the amendments will not have a significant impact on the Group’s consolidated financial
statements.
(g) Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between An
Investor and Its Associate or Joint Venture
These amendments address an inconsistency between IFRS 10 and IAS 28 in the sale and
contribution of assets between an investor and its associate or joint venture. A full gain or
loss is recognised when a transaction involves a business. A partial gain or loss is recognised
when a transaction involves assets that do not constitute a business, even if those assets
are in a subsidiary. The Group anticipates that the adoption of the amendments will not
have a significant impact on the Group’s consolidated financial statements.
F-231
308 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
2. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (CONTINUED)
2.2. Impact of standards issued but not yet applied by the Group (Continued)
(h) Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
Amendments to IFRS 16 specify the requirements that a seller-lessee uses in measuring the
lease liability arising in a sale and leaseback transaction to ensure the seller-lessee does
not recognise any amount of the gain or loss that relates to the right of use it retains.
The amendments are effective for annual periods beginning on or after 1 January 2024
and shall be applied retrospectively to sale and leaseback transactions entered into after
the date of initial application of IFRS 16 (i.e., 1 January 2019). The Group anticipates
that the adoption of the amendments will not have a significant impact on the Group’s
consolidated financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with IFRSs issued by the IASB.
In addition, the consolidated financial statements include applicable disclosures required by the Rules
Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“Listing Rules”) and
by the Hong Kong Companies Ordinance (“CO”).
The consolidated financial statements have been prepared on the historical cost basis except for financial
instruments that are measured at fair values at the end of each reporting period, as explained in the
accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is
directly observable or estimated using another valuation technique. In estimating the fair value of an
asset or a liability, the Group takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or liability at the
measurement date.
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is
determined on such a basis, except for share-based payment transactions that are within the scope of
IFRS 2 Share-based Payment, leasing transactions that are accounted for in accordance with IFRS 16,
and measurements that have some similarities to fair value but are not fair value, such as net realisable
value in IAS 2 Share-based Payment or value in use in IAS 36 Impairment of Assets.
For financial instruments, which are transacted at fair value and a valuation technique that unobservable
input is to be used to measure fair value in subsequent periods, the valuation technique is calibrated
so that at initial recognition the results of the valuation technique equals the transaction price.
F-232
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 309
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
(including structured entities) controlled by the Company and its subsidiaries. Control is achieved when
the Company:
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
When the Group has less than a majority of the voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities
of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing
whether or not the Group’s voting rights in an investee are sufficient to give it power, including:
the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of
the other vote holders;
potential voting rights held by the Group, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Group has, or does not have,
the current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings.
F-233
310 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Basis of consolidation (Continued)
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of profit or loss
and other comprehensive income from the date the Group gains control until the date when the Group
ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the shareholders of the
Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed
to the shareholders of the Company and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which
represent present ownership interests entitling their holders to a proportionate share of net assets of
the relevant subsidiaries upon liquidation.
Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant
components of equity and the non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and
the non-controlling interests according to the Group’s and the non-controlling interests’ proportionate
interest.
Any difference between the amount by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly in equity and attributed to shareholders
of the Company.
F-234
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 311
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Basis of consolidation (Continued)
Changes in the Group’s ownership interests in existing subsidiaries (Continued)
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and non-
controlling interests (if any) are derecognised. A gain or loss is recognised in profit or loss and is
calculated as the difference between (i) the aggregate of the fair value of the consideration received
and the fair value of any retained interest and (ii) the carrying amount of the assets (including goodwill),
and liabilities of the subsidiary attributable to shareholder of the company. All amounts previously
recognised in other comprehensive income in relation to that subsidiary are accounted for as if the
Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit
or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair
value of any investment retained in the former subsidiary at the date when control is lost is regarded
as the fair value on initial recognition for subsequent accounting under IFRS9, when applicable, the
cost on initial recognition of an investment in an associate or a joint venture.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred
in a business combination is measured at fair value, which is calculated as the sum of the acquisition-
date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former
shareholders of the acquiree and the equity interests issued by the Group in exchange for control of
the acquiree. Acquisition related costs are generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at
their fair value, except that:
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at
the acquisition date (see the accounting policy below); and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-
current Assets Held for Sale and Discontinued Operations are measured in accordance with that
standard.
lease liabilities are recognised and measured at the present value of the remaining lease payments
(as defined in IFRS 16) as if the acquired leases were new leases at the acquisition date, except
for leases for which (a) the lease term ends within 12 months of the acquisition date; or (b) the
underlying asset is of low value. Right-of-use assets are recognised and measured at the same
amount as the relevant lease liabilities, adjusted to reflect favourable or unfavourable terms of
the lease when compared with market terms.
F-235
312 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Business combinations (Continued)
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net amounts of the identifiable assets acquired and the liabilities
assumed as at the acquisition date. If, after re-assessment, the net of the acquisition-date amounts of
the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred,
the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously
held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate
share of the relevant subsidiary’s net assets in the event of liquidation are initially measured at the non-
controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net
assets or at fair value. The choice of measurement basis is made on a transaction-by-transaction basis.
When the consideration transferred by the Group in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured
at its acquisition-date fair value and included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with the corresponding adjustments made against
goodwill. Measurement period adjustments are adjustments that arise from additional information
obtained during the “measurement period” (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition date.
The subsequent accounting for the contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement
is accounted for within equity. Contingent consideration that is classified as an asset or a liability is
remeasured at subsequent reporting dates of fair value, with the corresponding gain or loss being
recognised in profit or loss.
When a business combination is achieved in stages, the Group’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains
control), and the resulting gain or loss, if any, is recognised in profit or loss or other comprehensive
income, as appropriate. Amounts arising from interests in the acquiree prior to the acquisition date
that have previously been recognised in other comprehensive income and measured under IFRS 9 would
be accounted for on the same basis as would be required if the Group had disposed directly of the
previously held equity interest.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which
the accounting is incomplete. Those provisional amounts are adjusted retrospectively during the
measurement period (see above), and additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed at the acquisition date that, if known,
would have affected the amounts recognised at that date.
F-236
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 313
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition
of the business less any accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the cash-generating units (or
groups of cash-generating units) that is expected to benefit from the synergies of the combination,
which represent the lowest level at which the goodwill is monitored for internal management purposes
and not larger than an operating segment.
A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is
tested for impairment annually, or more frequently when there is indication that the unit may be
impaired. For goodwill arising from an acquisition in a reporting period, the cash-generating unit (or
group of cash-generating units) to which goodwill has been allocated is tested for impairment before
the end of that reporting period. If the recoverable amount is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other
assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit (or group
of cash-generating units).
On disposal of the relevant cash-generating unit, or any of the cash-generating unit within the group
of cash-generating units, the attributable amount of goodwill is included in the determination of
the amount of profit or loss on disposal. When the Group disposes of an operation within the cash-
generating unit (or a cash-generating unit within a group of cash-generating units), the amount of
goodwill disposed of is measured on the basis of the relative values of the operation (or the cash-
generating unit) disposed of and the portion of the cash-generating unit (or the group of cash-
generating units) retained.
The Group’s policy for goodwill arising on the acquisition of an associate and a joint venture is described
below.
Investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but is not control
or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
F-237
314 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Investments in associates and joint ventures (Continued)
The results and assets and liabilities of associates and joint ventures are incorporated in the consolidated
financial statements using the equity method of accounting. The financial statements of associates and
joint ventures used for equity accounting purposes are prepared using uniform accounting policies as
those of the Group for like transactions and events in similar circumstances. Under the equity method,
investment in an associate or a joint venture is initially recognised in the consolidated statement of
financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and
other comprehensive income of the associate or joint venture. Changes in net assets of the associate/
joint venture other than profit or loss and other comprehensive income are not accounted for unless
such changes resulted in changes in ownership interest held by the Group. When the Group’s share
of losses of an associate or joint venture exceeds the Group’s interest in that associate or joint venture
(which includes any long-term interests that, in substance, form part of the Group’s net investment in
the associate or join venture), the Group discontinues recognising its share of further losses. Additional
losses are recognised only to the extent that the Group has incurred legal or constructive obligations
or made payments on behalf of that associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the
date on which the investee becomes an associate or a joint venture. On acquisition of the investment in
an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the
net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which
is included within the carrying amount of the investment. Any excess of the Group’s share of the net
fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is
recognised immediately in profit or loss in the period in which the investment is acquired.
The Group assesses whether there is an objective evidence that the interest in an associate or a joint
venture may be impaired. When any objective evidence exists, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of assets
as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs
of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset,
including goodwill, that forms part of the carrying amount of the investment. Any reversal of that
impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of
the investment subsequently increases.
F-238
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 315
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Investments in associates and joint ventures (Continued)
When the Group ceases to have significant influence over an associate or joint control over a joint
venture, it is accounted as a disposal of the entire interest in the investee with a resulting gain or loss
being recognised in profit or loss. When the Group retains an interest in the former associate or joint
venture and the retained interest is a financial asset within the scope of IFRS 9, the Group measures
the retained interest at that date and the fair value is regarded as its fair value on initial recognition.
The difference between the carrying amount of the associate or joint venture, and the fair value of
any retained interest and any proceeds from disposing the relevant interest in the associate or joint
venture is included in the determination of the gain or loss on disposal of the associate or joint venture.
In addition, the Group accounts for all amounts previously recognised in other comprehensive income
in relation to that associate or joint venture on the same basis as would be required if that associate
or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss
previously recognised in other comprehensive income by that associate or joint venture would be
reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the
gain or loss from equity to profit or loss (as a reclassification adjustment) upon disposal/partial disposal
of the relevant associate or joint venture.
When the Group reduces its ownership interest in an associate or a joint venture but the Group
continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain
or loss that had previously been recognised in other comprehensive income relating to that reduction
in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the
related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Group, profits and losses
resulting from the transactions with the associate or joint venture are recognised in the Group’s
consolidated financial statements only to the extent of interests in the associate or joint venture that
are not related to the Group.
Revenue from contracts with customers
The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of
the goods or services underlying the particular performance obligation is transferred to the customer.
A performance obligation represents a good and service (or a bundle of goods or services) that is distinct
or a series of distinct goods or services that are substantially the same.
F-239
316 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Revenue from contracts with customers (Continued)
Control is transferred over time and revenue is recognised over time by reference to the progress
towards complete satisfaction of the relevant performance obligation if one of the following criteria
is met:
the customer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Group performs;
the Group’s performance creates and enhances an asset that the customer controls as the Group
performs; or
the Group’s performance does not create an asset with an alternative use to the Group and the
Group has an enforceable right to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct
good or service.
A contract asset represents the Group’s right to consideration in exchange for goods or services that
the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment
in accordance with IFRS 9. In contrast, a receivable represents the Group’s unconditional right to
consideration, i.e. only the passage of time is required before payment of that consideration is due.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for
which the Group has received consideration (or an amount of consideration is due) from the customer.
A contract asset and a contract liability relating to a contract are accounted for an presented on a net
basis.
Contract with multiple performance obligations (including allocation of transaction pricing)
For contracts that contain more than one performance obligations, the Group allocates the transaction
price to each performance obligation on a relative stand-alone selling price basis, except for the
allocation of discounts and variable consideration.
The stand-alone selling price of the distinct good or service underlying each performance obligation
is determined at contract inception. It represents the price at which the Group would sell a promised
good or service separately to a customer. If a stand-alone selling price is not directly observable, the
Group estimates it using appropriate techniques such that the transaction price ultimately allocated
to any performance obligation reflects the amount of consideration to which the Group expects to be
entitled in exchange for transferring the promised goods or services to the customer.
F-240
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 317
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Revenue from contracts with customers (Continued)
Over time revenue recognition: measurement of progress towards complete satisfaction of a
performance obligation
Output method
The progress towards complete satisfaction of a performance obligation is measured based on output
method, which is to recognise revenue on the basis of direct measurements of the value of the goods
or services transferred to the customer to date relative to the remaining goods or services promised
under the contract, that best depict the Group’s performance in transferring control of goods or services.
Variable consideration
For contracts that contain variable consideration, the Group estimates the amount of consideration
to which it will be entitled using either (a) the expected value method or (b) the most likely amount,
depending on which method better predicts the amount of consideration to which the Group will be
entitled.
The estimated amount of variable consideration is included in the transaction price only to the extent
that it is highly probable that such an inclusion will not result in a significant revenue reversal in the
future when the uncertainty associated with the variable consideration is subsequently resolved.
At the end of each reporting period, the Group updates the estimated transaction price (including
updating its assessment of whether an estimate of variable consideration is constrained) to represent
faithfully the circumstances present at the end of the reporting period and the changes in circumstances
during the reporting period.
Principal versus agent
When another party is involved in providing goods or services to a customer, the Group determines
whether the nature of its promise is a performance obligation to provide the specified goods or services
itself (i.e. the Group is a principal) or to arrange for those goods or services to be provided by the other
party (i.e. the Group is an agent).
The Group is a principal if it controls the specified goods or service before that goods or service is
transferred to a customer.
The Group is an agent if its performance obligation is to arrange for the provision of the specified good
or service by another party. In this case, the Group does not control the specified goods or service
provided by another party before that goods or service is transferred to the customer. When the Group
acts as an agent, it recognizes revenue in the amount of any fee or commission to which it expects to be
entitled in exchange for arranging for the specified goods or services to be provided by the other party.
F-241
318 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Revenue from contracts with customers (Continued)
Over time revenue recognition: measurement of progress towards complete satisfaction of a
performance obligation (Continued)
Costs to fulfil a contract
The Group incurs costs to fulfil a contract in its business activities, e.g. sponsorship services. The Group
first assesses whether these costs qualify for recognition as an asset in terms of other relevant standards,
failing which it recognises an asset for these costs only if they meet all of the following criteria:
(i) the costs relate directly to a contract or to an anticipated contract that the Group can specifically
identify;
(ii) the costs generate or enhance resources of the Group that will be used in satisfying (or in
continuing to satisfy) performance obligations in the future; and
(iii) the costs are expected to be recovered.
The asset so recognised is subsequently amortised to profit or loss on a systematic basis that is consistent
with the transfer to the customer of the goods or services to which the assets relate. The asset is subject
to impairment review.
Leases
Definition of a lease
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
For contracts entered into or modified or arising from business combinations on or after the date of
initial application, the Group assesses whether a contract is or contains a lease based on the definition
under IFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will not
be reassessed unless the terms and conditions of the contract are subsequently changed.
The Group as a lessee
Allocation of consideration to components of a contract
For a contract that contains a lease component and one or more additional lease or non-lease
components, the Group allocates the consideration in the contract to each lease component on the
basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of
the non-lease components.
Non-lease components are separated from lease component on the basis of their relative stand-alone
prices.
As a practical expedient, leases with similar characteristics are accounted on a portfolio basis when the
Group reasonably expects that the effects on the financial statements would not differ materially from
individual leases within the portfolio.
F-242
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 319
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessee (Continued)
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to leases of buildings/motor vehicles/
machinery and equipment that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option. It also applies the recognition exemption for lease of low-value
assets. Lease payments on short-term leases and leases of low-value assets are recognized as expense
on a straight-line basis over the lease term.
Right-of-use assets
The cost of right-of-use asset includes:
the amount of the initial measurement of the lease liability;
any lease payments made at or before the commencement date, less any lease incentives received;
any initial direct costs incurred by the Group; and
an estimate of costs to be incurred by the Group in dismantling and removing the underlying
assets, restoring the site on which it is located or restoring the underlying asset to the condition
required by the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities.
Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying
leased assets at the end of the lease term are depreciated from commencement date to the end of the
useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term.
The Group presents right-of-use assets as a separate line item on the consolidated statement of financial
position.
Refundable rental deposits
Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair value.
Adjustments to fair value at initial recognition are considered as additional lease payments and included
in the cost of right-of-use assets.
F-243
320 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessee (Continued)
Lease liabilities
At the commencement date of a lease, the Group recognizes and measures the lease liability at the
present value of lease payments that are unpaid at that date. In calculating the present value of lease
payments, the Group uses the incremental borrowing rate at the lease commencement date if the
interest rate implicit in the lease is not readily determinable.
The lease payments include:
fixed payments (including in-substance fixed payments) less any lease incentives receivable;
variable lease payments that depend on an index or a rate, initially measured using the index or
rate as at the commencement date;
amounts expected to be payable by the Group under residual value guarantees;
the exercise price of a purchase option if the Group is reasonably certain to exercise the option;
and
payments of penalties for terminating a lease, if the lease term reflects the Group exercising an
option to terminate the lease.
After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-
use assets) whenever:
the lease term has changed or there is a change in the assessment of exercise of a purchase
option, in which case the related lease liability is remeasured by discounting the revised lease
payments using a revised discount rate at the date of assessment.
the lease payments change due to changes in market rental rates following a market rent review
or expected payment under a guaranteed residual value, in which cases the related lease liability
is remeasured by discounting the revised lease payments using the initial discount rate.
The Group presents lease liabilities as a separate line item on the consolidated statement of financial
position.
F-244
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 321
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessee (Continued)
Lease modifications
The Group accounts for a lease modification as a separate lease if:
the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
the consideration for the leases increases by an amount commensurate with the stand-alone price
for the increase in scope and any appropriate adjustments to that stand-alone price to reflect
the circumstances of the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease
liability based on the lease term of the modified lease by discounting the revised lease payments using
a revised discount rate at the effective date of the modification.
The Group accounts for the remeasurement of lease liabilities and lease incentives from lessor by making
corresponding adjustments to the relevant right-of-use asset. When the modified contract contains a
lease component and one or more additional lease or non-lease components, the Group allocates the
consideration in the modified contract to each lease component on the basis of the relative stand-alone
price of the lease component and the aggregate stand-alone price of the non-lease components.
The Group as a lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms
of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset
to the lessee, the contract is classified as a finance lease. All other leases are classified as operating
leases.
Amounts due from lessees under finance leases are recognised as receivables at commencement date
at amounts equal to net investments in the leases, measured using the interest rate implicit in the
respective leases. Initial direct costs are included in the initial measurement of the net investments in
the leases. Interest income is allocated to accounting periods so as to reflect a constant periodic rate
of return on the Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term
of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset, and such costs are recognised as an expense on a
straight-line basis over the lease term. Upon application of IFRS 16 on 1 January 2019, variable lease
payments for operating leases that depend on an index or a rate are estimated and included in the total
lease payments to be recognised on a straight-line basis over the lease term. Variable lease payments
that do not depend on an index or a rate are recognised as income when they arise.
F-245
322 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Leases (Continued)
The Group as a lessor (Continued)
Allocation of consideration to components of a contract
When a contract includes both leases and non-lease components, the Group applies IFRS 15 to allocate
consideration in a contract to lease and non-lease components. Non-lease components are separated
from lease component on the basis of their relative stand-alone selling prices.
Refundable rental deposits
Refundable rental deposits received are accounted under IFRS 9 and initially measured at fair value.
Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.
Lease modification
The Group accounts for a modification to an operating lease as a new lease from the effective date of
the modification, considering any prepaid or accrued lease payments relating to the original lease as
part of the lease payments for the new lease.
Sale and leaseback transactions
The Group applies the requirements of IFRS 15 to assess whether sale and leaseback transaction
constitutes a sale by the Group.
The Group as a buyer-lessor
For a transfer of asset that does not satisfy the requirements of IFRS 15 to be accounted for as a sale of
asset, the Group as a buyer-lessor does not recognise the transferred asset and recognises a receivable
arising from sale and leaseback arrangements equal to the transfer proceeds within the scope of IFRS 9.
For a transfer of asset that satisfies the requirements of IFRS 15 to be accounted for as a sale of asset,
the Group as a buyer-lessor accounts for the purchase of the asset applying applicable standards, and
for the lease applying the lessor accounting requirements in accordance with IFRS 16.
Leasehold land and building
When the Group makes payments for ownership interests of properties which includes both leasehold
land and building elements, the entire consideration is allocated between the leasehold land and the
building elements in proportion to the relative fair values at initial recognition.
To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land
that is accounted for as an operating lease is presented as “right-of-use assets” in the consolidated
statement of financial position. When the consideration cannot be allocated reliably between non-
lease building element and undivided interest in the underlying leasehold land, the entire properties
are classified as property, plant and equipment.
F-246
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 323
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Foreign currencies
In preparing the financial statements of each individual group entities, transactions in currencies other
than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges
prevailing on the dates of the transactions. At the end of the reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing on the date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary
items, are recognised in profit or loss in the period in which they arise.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the
Group’s operations are translated into the presentation currency of the Group using exchange rates
prevailing at the end of each reporting period. Income and expenses items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which
case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising,
if any, are recognised in other comprehensive income and accumulated in equity under the heading of
translation reserve (attributed to non-controlling interests as appropriate).
Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign
operation are treated as assets and liabilities of that foreign operation and retranslated at the rate of
exchange prevailing at the end of the reporting period. Exchange differences arising are recognised in
other comprehensive income.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use
or sale, are added to the cost of those assets until such time as the assets are substantially ready for
their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply
with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which
the Group recognises as expenses the related costs for which the grants are intended to compensate.
Specifically, government grants whose primary condition is that the Group should purchase, construct
or otherwise acquire non-current assets are recognised as deferred income.
F-247
324 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Government grants (Continued)
Government grants that are receivable as compensation for expenses or losses already incurred or
for the purpose of giving immediate financial support to the Group with no future related costs are
recognised in profit or loss in the period in which they become receivable.
Employee benefits
Social welfare
Social welfare expenditure refers to payments for employees’ social welfare system established by
the Government of the PRC, including social insurance, housing funds and other social welfare
contributions. The Group contributes on a monthly basis to these funds based on certain percentage
of the salaries of the employees and the contributions are recognised in profit or loss for the period
when employees have rendered service entitling them to the contribution. The Group’s liabilities in
respect of these funds are limited to the contribution payable in the reporting period.
Contributions to pension schemes and annuity plans
Payments to defined contribution retirement benefits plan are charged as expenses when employees have
rendered service entitling them to the contributions. The employees of the Group participate in various
defined contribution pension schemes principally organised by municipal and provincial governments
(the “Social Security Plans”). The Group contributes for employees based on a certain percentage of
their salary and within the limit prescribed by the government to the pension scheme on a monthly
basis. The contribution shall be managed and paid to retired employees through labor and social welfare
authorities in accordance with the provisions. There are no forfeited contributions in the Social Security
Plans. In addition to the above-mentioned Social Security Plans, certain employees participate in the
employer-sponsored enterprise annuity plans (the “annuity plans”) as well. The Group shall contribute
to the annuity plans in accordance with agreed bases and percentages. Forfeited contributions by those
employees who leave the annuity plans prior to the full vesting of their contributions are not used to
reduce the existing level of contributions and are recorded in the public account of the annuity plans
to be attributed to the members of the annuity plans after fulfilling the approval procedures.
Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees
have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuations being carried out at the end of each annual
reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes
to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected
immediately in the consolidated statement of financial position with a charge or credit recognised in
other comprehensive income in the period in which they occur. Remeasurement recognised in other
comprehensive income is reflected immediately in retained earnings and will not be reclassified to
profit or loss.
F-248
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 325
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Employee benefits (Continued)
Retirement benefit costs and termination benefits (Continued)
Past service cost is recognised in profit or loss in the period of a plan amendment or curtailment and a
gain or loss on settlement is recognised when settlement occurs. When determining past service cost,
or a gain or loss on settlement, an entity shall remeasure the net defined benefit liability or asset using
the current fair value of plan assets and current actuarial assumptions, reflecting the benefits offered
under the plan and the plan assets before and after the plan amendment, curtailment or settlement,
without considering the effect of asset ceiling (i.e. the present value of any economic benefits available
in the form of refunds from the plan or reductions in future contributions to the plan).
Net interest is calculated by applying the discount rate at the beginning of the period to the net defined
benefit liability or asset. However, if the Group remeasures the net defined benefit liability or asset
before plan amendment, curtailment or settlement, the Group determines net interest for the remainder
of the annual reporting period after the plan amendment, curtailment or settlement using the benefits
offered under the plan and the plan assets after the plan amendment, curtailment or settlement and
the discount rate used to remeasure such net defined benefit liability or asset, taking into account any
changes in the net defined benefit liability or asset during the period resulting from contributions or
benefit payments.
Defined benefit costs are categorised as follows:
service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements);
net interest expense or income; and
remeasurement.
The retirement benefit obligation recognised in the consolidated statement of financial position
represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from
this calculation is limited to the present value of any economic benefits available in the form of refunds
from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the Group entity can no longer
withdraw the offer of the termination benefit and when it recognises any related restructuring costs.
Discretionary contributions made by employees or third parties reduce service cost upon payment of
these contributions to the plan.
When the formal terms of the plans specify that there will be contributions from employees or third
parties, the accounting depends on whether the contributions are linked to service, as follows:
If the contributions are not linked to services (for example contributions are required to reduce
a deficit arising from losses on plan assets or from actuarial losses), they are reflected in the
remeasurement of the net defined benefit liability or asset.
F-249
326 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Employee benefits (Continued)
Retirement benefit costs and termination benefits (Continued)
If contributions are linked to services, they reduce service costs. For the amount of contribution
that is dependent on the number of years of service, the entity reduces service cost by attributing
the contributions to periods of service using the attribution method required by IAS 19 paragraph
70 for the gross benefits.
Short-term and other long-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be
paid as and when employees rendered the services. All short-term employee benefits are recognized as
an expense unless another IFRS requires or permits the inclusion of the benefit in the cost of an asset.
A liability is recognized for benefits accruing to employees (such as wages and salaries, annual leave
and sick leave) after deducting any amount already paid.
Liabilities recognized in respect of other long-term employee benefits are measured at the present value
of the estimated future cash outflows expected to be made by the Group in respect of services provided
by employees up to the reporting date. Any changes in the liabilities’ carrying amounts resulting from
service cost, interest and remeasurements are recognised in the profit or loss except to the extent that
another IFRS requires or permits their inclusion in the cost of an asset.
The liability related to the above supplementary benefit obligations existing at the end of each reporting
period, is calculated by independent actuaries using the Projected Unit Credit Method and is recorded
as a liability in the consolidated statement of financial position. The liability is determined through
discounting the amount of future benefits that the employees are entitled for their services in the
current and prior periods. The discount rates are based on the yields of RMB treasury bonds which
have terms to maturity approximating the terms of the related liability. All actuarial gains and losses
are recognized immediately through other comprehensive income in order for the net pension asset or
liability recognized in the consolidated statement of financial position to reflect the full value of the
plan deficit or surplus.
Share-based payment transactions
Share options granted to employees
The Company’s subsidiary Haitong International Securities Group Limited (“HISGL”) operates a share
option scheme for the purpose of providing incentives and rewards to eligible participants who
contribute to the success of the Group’s operations. Employees (including directors) of the Group receive
remuneration in the form of share-based payment transactions, whereby employees render services as
consideration for equity instruments (“equity settled transactions”).
Equity-settled share-based payments to employees and others providing similar services are measured
at the fair value of the equity instruments at the grant date.
F-250
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 327
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Share-based payment transactions (Continued)
Share options granted to employees (Continued)
The fair value of the equity-settled share-based payments determined at the grant date without taking
into consideration all non-market vesting conditions is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity (share-based payment reserve). At the end of each reporting period, the
Group revises its estimate of the number of equity instruments expected to vest based on assessment
of all relevant non-market vesting conditions. The impact of the revision of the original estimates, if
any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with
a corresponding adjustment to share options reserve. For share options that vest immediately at the
date of grant, the fair value of the share options granted is expensed immediately to profit or loss.
When share options are exercised, the amount previously recognised in share options reserve will
be transferred to capital reserve. When share options are forfeited after the vesting date or are still
not exercised at the expiry date, the amount previously recognised in share options reserve will be
transferred to capital reserve.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before
income tax as reported in the consolidated statement of profit or loss because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax base used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible temporary difference to the
extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax
liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated
with such investments and interests are only recognised to the extent that it is probable that there will
be sufficient taxable profits against which to utilise the benefits of the temporary differences and they
are expected to reverse in the foreseeable future.
F-251
328 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Taxation (Continued)
The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group
applies IAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately.
Temporary differences relating to right-of-use assets and lease liabilities are not recognised at initial
recognition and over the lease terms due to application of the initial recognition exemption.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case the current and the
deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where
current tax or deferred tax arises from the initial accounting for a business combination, the tax effect
is included in the accounting for the business combination.
Property and equipment
Property and equipment including leasehold land (classified as finance lease) and building held for use
in the production or supply of goods or services, or for administrative purpose (other than construction
in progress), are stated in the consolidated statement of financial position at cost less accumulated
depreciation and accumulated impairment losses, if any.
Properties in the course of construction for production, supply or administrative purposes are carried
at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are
classified to the appropriate categories of property and equipment when completed and ready for
intended use. Depreciation of these assets, on the same basis as other property assets, commences
when the assets are ready for their intended use.
F-252
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 329
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Property and equipment (Continued)
Depreciation is recognised so as to write off the cost of items of property and equipment (other than
construction in progress) less their residual values over their estimated useful lives, using straight line
method. The estimated useful lives, residual values and depreciation method are reviewed at the end of
each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or
retirement of an item of property and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or loss.
The estimated residual value rates and useful lives of each class of property and equipment are as
follows:
Estimated residual
Classes value rates Useful lives
Land and buildings 3 – 5% 30 – 40 years
Furniture, fixtures and equipment 3 – 10% 5 – 11 years
Transportation equipment 3 – 10% 5 – 8 years
Electronic equipment 3 – 10% 3 – 5 years
Assets held for operating lease businesses 15% 18 – 25 years
Leasehold improvements nil Over the lease term
Buildings under development for future shareholder-occupied purpose
When buildings are in the course of development for production or administrative purposes, the
amortisation of prepaid lease payment provided during the construction period in included as part of
costs of buildings under construction. Buildings under construction are carried at cost, less any identified
impairment losses. Deprecation of buildings commences when they are available for use (i.e. when
they are in the location and condition necessary for them to be capable of operating in the manner
intended by management.)
Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation.
Investment properties are initially measured at cost, including any directly attributable expenditure.
Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated
depreciation and any accumulated impairment losses.
The above investment properties are depreciated over their estimated useful lives of 30 years and
after taking into account their estimated residual value of 3%-5%, using the straight-line method.
Depreciation is recognised so as to write off the cost of investment properties over their estimated useful
lives and after taking into account of their estimated residual value, using the straight-line method.
F-253
330 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Investment properties (Continued)
An investment property is derecognised upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from the disposals. Any gain or
loss arising on derecognition of the property (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which
the item is derecognised.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated
amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite lives
is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and
amortisation method are reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives
that are acquired separately are carried at cost less any subsequent accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill and are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful
lives are reported at cost less accumulated amortisation and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
Derecognition of Intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset are measured at the
difference between the net disposal proceeds and the carrying amount of the asset and are recognised
in profit or loss in the period when the asset is derecognised.
Impairment on property and equipment, right-of-use assets, contract costs and intangible
assets other than goodwill
At the end of the reporting period, the Group reviews the carrying amounts of its property and
equipment, right-of-use assets, intangible assets with finite useful lives and contract costs to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of
the impairment loss, if any. Intangible assets with indefinite useful lives and intangible assets not yet
available for use are tested for impairment annually, and whenever there is an indication that they
may be impaired.
F-254
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 331
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Intangible assets (Continued)
Impairment on property and equipment, right-of-use assets, contract costs and intangible
assets other than goodwill (Continued)
The recoverable amount of property, plant and equipment, right-of-use assets, and intangible assets
are estimated individually. When it is not possible to estimate the recoverable amount individually,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
In addition, the Group assesses whether there is indication that corporate assets may be impaired. If
such indication exists, corporate assets are also allocated to individual cash-generating units, when a
reasonable and consistent basis of allocation can be identified, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Before the Group recognises an impairment loss for assets capitalised as contract costs under IFRS 15,
the Group assesses and recognises any impairment loss on other assets related to the relevant contracts
in accordance with applicable standards. Then, impairment loss, if any, for assets capitalised as contract
costs is recognised to the extent the carrying amounts exceeds the remaining amount of consideration
that the Group expects to receive in exchange for related goods or services less the costs which relate
directly to providing those goods or services that have not been recognised as expenses. The assets
capitalised as contract costs are then included in the carrying amount of the cash-generating unit to
which they belong for the purpose of evaluating impairment of that cash-generating unit.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the
asset (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable
amount. For corporate assets or portion of corporate assets which cannot be allocated on a reasonable
and consistent basis to a cash-generating unit, the Group compares the carrying amount of a group of
cash-generating units, including the carrying amounts of the corporate assets or portion of corporate
assets allocated to that group of cash-generating units, with the recoverable amount of the group of
cash-generating units. In allocating the impairment loss, the impairment loss is allocated first to reduce
the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis
based on the carrying amount of each asset in the unit or the group of cash-generating units. The
carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if
measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would
otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit or the
group of cash-generating units. An impairment loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a revalued amount under another standard, in which case the impairment
loss is treated as a revaluation decrease under that standard.
F-255
332 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Intangible assets (Continued)
Impairment on property and equipment, right-of-use assets, contract costs and intangible
assets other than goodwill (Continued)
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit or a group of cash-generating units) is increased to the revised estimate of its recoverable amount,
but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or a cash-generating unit or a group
of cash-generating units) or in prior years. A reversal of an impairment loss is recognised immediately
in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined
on a first-in, first-out method. Net realisable value represents the estimated selling price for inventories
less all estimated costs of completion and costs necessary to make the sale.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of
a past event, it is probable that the Group will be required to settle that obligation, and the amount
of the obligation can be reliably estimated.
The amount recognized as provision is the best estimate of the consideration required to settle the
present obligation at the end of each reporting period, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value of those cash flows (when the effect
of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will
be received and the amount of the receivable can be measured reliably.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value except for trade receivables
arising from contracts with customers which are initially measured in accordance with IFRS 15.
Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial
liabilities (other than financial assets or financial liabilities at fair value through profit or loss (“FVTPL”))
are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at FVTPL are recognised immediately in profit or loss.
F-256
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 333
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
The effective interest method is a method of calculating the amortised cost of a financial asset or
financial liability and of allocating interest income and interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash receipts and payments
(including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial asset
or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Interest which are derived from the Group’s ordinary course of business are presented as revenue.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost:
the financial asset is held within a business model whose objective is to collect contractual cash
flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are subsequently measured at fair value through
other comprehensive income (“FVTOCI”):
the financial asset is held within a business model whose objective is achieved by both selling
and collecting contractual cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
All other financial assets are subsequently measured at FVTPL, except that at the date of initial
application of IFRS 9 initial recognition of a financial asset the Group may irrevocably elect to present
subsequent changes in fair value of an equity investment in other comprehensive income if that equity
investment is neither held for trading nor contingent consideration recognised by an acquirer in a
business combination to which IFRS 3 Business Combinations applies.
F-257
334 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Classification and subsequent measurement of financial assets (Continued)
A financial asset is held for trading if:
it has been acquired principally for the purpose of selling in the near term; or
on initial recognition it is a part of a portfolio of identified financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
In addition, the Group may irrevocably designate a financial asset that are required to be measured at
the amortised cost or FVTOCI as measured at FVTPL if doing so eliminates or significantly reduces an
accounting mismatch.
(i) Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost and debt instruments subsequently measured at FVTOCI.
Interest income is calculated by applying the effective interest rate to the gross carrying amount
of a financial asset, except for financial assets that have subsequently become credit-impaired
(see below). For financial assets that have subsequently become credit-impaired, interest income
is recognised by applying the effective interest rate to the amortised cost of the financial asset
from the next reporting period. If the credit risk on the credit – impaired financial instrument
improves so that the financial asset is no longer credit-impaired, interest income is recognised
by applying the effective interest rate to the gross carrying amount of the financial asset from
the beginning of the reporting period following the determination that the asset is no longer
credit impaired.
(ii) Debt instruments classified as at FVTOCI
Subsequent changes in the carrying amounts for debt instruments classified as at FVTOCI as a
result of interest income calculated using the effective interest method, and foreign exchange
gains and losses are recognised in profit or loss. All other changes in the carrying amount of
these debt instruments are recognised in OCI and accumulated under the heading of investment
revaluation reserve of financial assets at FVTOCI. Impairment allowances are recognised in profit
or loss with corresponding adjustment to OCI without reducing the carrying amounts of these
debt instruments. When these debt instruments are derecognised, the cumulative gains or losses
previously recognised in OCI are reclassified to profit or loss.
F-258
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 335
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Classification and subsequent measurement of financial assets (Continued)
(iii) Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction
costs. Subsequently, they are measured at fair value with gains and losses arising from changes
in fair value recognised in OCI and accumulated in the FVTOCI reserve; and are not subject to
impairment assessment. The cumulative gain or loss will not be reclassified to profit or loss on
disposal of the equity investments, and will be transferred to retained earnings.
Dividends on these investments in equity instruments are recognised in profit or loss when the
Group’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of the investment. Dividends are included in the “Investment income
and gains (net)” line item in profit or loss.
(iv) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI
or designated as FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with
any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in
profit or loss includes any dividend or interest earned on the financial asset and is included in
the “Investment income and gains (net)” line item.
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
The Group performs impairment assessment under expected credit loss (“ECL”) model on financial
assets (including loans and advances, other loans and receivables, financial assets held under resale
agreements, advances to customers on margin financing, accounts receivable, placements to banks and
other financial institutions, deposits with other banks, debt instruments measured at FVTOCI, and other
items (lease receivables, contract assets, loan commitments and financial guarantee contracts) which
are subject to impairment under IFRS 9. The amount of ECL is updated at the end of each reporting
period to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life
of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime
ECL that is expected to result from default events that are possible within 12 months after the reporting
date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions and an assessment of both the current
conditions at the reporting date as well as the forecast of future conditions.
F-259
336 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
The Group always recognises lifetime ECL for accounts receivable recognised in accordance with IFRS 15.
To measure the ECL, account receivables have been grouped based on shared credit risk characteristics.
The Group collectively uses a provision matrix with appropriate aging groupings to assess level of
provision rate.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there
has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL.
The assessment of whether lifetime ECL should be recognised is based on significant increases in the
likelihood or risk of a default occurring since initial recognition.
(i) Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date with
the risk of a default occurring on the financial instrument as at the date of initial recognition. In
making this assessment, the Group considers both quantitative and qualitative information that
is reasonable and supportable, including historical experience and forward-looking information
that is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk
has increased significantly:
Significant degradation of the obligor’s actual or expected internal credit risk level or
significant decrease of behaviour scores for assessing credit risks;
Actual or expected significant changes in external credit rating on the obligor or the debts;
Significant changes in values of collaterals pledged for the debt, which may reduce
obligor’s economic incentive to make repayments within the term specified in the contract
or affect probability of default incurred; for example, the obligor’s performance guarantee
ability is weakened due to decline in values of pledged securities, the obligor fails to
provide supplement collaterals as specified in the contract within a reasonable time or
the obligor may have stronger incentive to be in arrears with the debt.
Actual or expected adverse changes in the obligor’s business, financial or economic status,
which may result in significant changes in the obligor’s debt solvency;
Overdue information of interests or principals;
F-260
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 337
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(i) Significant increase in credit risk (Continued)
Significant changes in external market index for credit risks of specific financial instrument
or alike financial instrument with the same expected life; for example, the obligor’s credit
spread, credit default swap price for the obligor or other market information related to
the obligor;
Actual or expected significant changes in quality of credit supports provided by the
guarantor, which may reduce obligor’s economic incentive to make repayments within the
term specified in the contract; for example, if the guarantor will no longer provide financial
support for the obligor, that may result in bankruptcy or receivership of the obligor, or
increase in probability of these liabilities default when the obligor makes limited payment
of operating funds (such as salaries or payments to key suppliers) so as to arrange the
payment obligations of financial liabilities at a lower priority.
Actual or expected significant changes in quality of credit enhancement or support for
creditor’s rights issued in securitization, which may result in ability decrease of relevant
subordinated interest to absorb ECL.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk
has increased significantly since initial recognition when contractual payments are more than
30 days past due.
Despite the foregoing, the Group assumes that the credit risk on a debt instrument has not
increased significantly since initial recognition if the debt instrument is determined to have low
credit risk at the reporting date. A debt instrument is determined to have low credit risk if i)
it has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash
flow obligations in the near term and iii) adverse changes in economic and business conditions
in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its
contractual cash flow obligations. The Group considers a debt instrument to have low credit risk
when it has an internal or external credit rating of ‘investment grade’ as per globally understood
definitions.
F-261
338 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(i) Significant increase in credit risk (Continued)
For loan commitments and financial guarantee contracts, the date that the Group becomes a
party to the irrevocable commitment is considered to be the date of initial recognition for the
purposes of assessing impairment. In assessing whether there has been a significant increase in
the credit risk since initial recognition of a loan commitment, the Group considers changes in the
risk of a default occurring on the loan to which a loan commitment relates; for loan commitments
and financial guarantee contracts, the Group considers the changes in the risk that the specified
debtor will default on the contract.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has
been a significant increase in credit risk and revises them as appropriate to ensure that the criteria
are capable of identifying significant increase in credit risk before the amount becomes past due.
(ii) Definition of default
For internal credit risk management, the Group considers an event of default occurs when
information developed internally or obtained from external sources indicates that the debtor
is unlikely to pay its creditors, including the Group, in full (without taking into account any
collaterals held by the Group).
Irrespective of the above, the Group considers that default has occurred when the instrument
is more than 90 days past due.
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events of default that have a detrimental
impact on the estimated future cash flows of that financial asset have occurred. Evidence that a
financial asset is credit – impaired includes observable data about the following events:
(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficulty, having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider;
F-262
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 339
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(iii) Credit-impaired financial assets (Continued)
(d) it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
(e) the disappearance of an active market for that financial asset because of financial
difficulties.
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty
is in severe financial difficulty and there is no realistic prospect of recovery, for example, when
the counterparty has been placed under liquidation or has entered into bankruptcy proceedings.
Financial assets written off may still be subject to enforcement activities under the Group’s
recovery procedures, taking into account legal advice where appropriate. A write-off constitutes
a derecognition event. Any subsequent recoveries are recognised in profit or loss.
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data adjusted by forward-
looking information. Estimation of ECL reflects an unbiased and probability-weighted amount
that is determined with the respective risks of default occurring as the weights.
Generally, the ECL is estimated as the difference between all contractual cash flows that are
due to the Group in accordance with the contract and all the cash flows that the Group expects
to receive, discounted at the effective interest rate determined at initial recognition. For a lease
receivable, the cash flows used for determining the ECL is consistent with the cash flows used
in measuring the lease receivable in accordance with IFRS 16 Leases.
For a financial guarantee contract, the Group is required to make payments only in the event
of a default by the debtor in accordance with the terms of the instrument that is guaranteed.
Accordingly, the expected losses is the present value of the expected payments to reimburse the
holder for a credit loss that it incurs less any amounts that the Group expects to receive from
the holder, the debtor or any other party.
F-263
340 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(v) Measurement and recognition of ECL (Continued)
For undrawn loan commitments, the ECL is the present value of the difference between the
contractual cash flows that are due to the Group if the holder of the loan commitments draws
down the loan, and the cash flows that the Group expects to receive if the loan is drawn down.
For ECL on financial guarantee contracts or on loan commitments for which the effective interest
rate cannot be determined, the Group will apply a discount rate that reflects the current market
assessment of the time value of money and the risks that are specific to the cash flows but only
if, and to the extent that, the risks are taken into account by adjusting the discount rate instead
of adjusting the cash shortfalls being discounted.
Where ECL is measured on a collective basis or cater for cases where evidence at the individual
instrument level may not yet be available, the financial instruments are grouped on the following
basis:
Nature of financial instruments;
Past-due status;
Nature, size and industry of debtors; and
External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics.
Interest income is calculated based on the gross carrying amount of the financial asset unless the
financial asset is credit impaired, in which case interest income is calculated based on amortised
cost of the financial asset.
For financial guarantee contracts and loan commitments, the loss allowances are recognised at
the higher of the amount of the loss allowance determined in accordance with IFRS 9; and the
amount initially recognised less, where appropriate, cumulative amount of income recognised
over the guarantee period.
F-264
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 341
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9
(Continued)
(v) Measurement and recognition of ECL (Continued)
For loss on undrawn loan commitments, the loss allowances are the present value of the
difference between:
(a) the contractual cash flows that are due to the Group if the holder of the loan commitment
draws down the loan; and
(b) the cash flows that the Group expects to receive if the loan is drawn down.
Except for investments in debt instruments that are measured at FVTOCI, loan commitments and
financial guarantee contracts, the Group recognises an impairment gain or loss in profit or loss
for all financial instruments by adjusting their carrying amount, with the exception of account
receivables, finance lease receivables, other receivables and prepayments, loans and advances,
other loans and receivables, financial assets held under resale agreements, advance to customers
on margin financing, placements to banks and other financial institutions, and deposits with other
banks, where the corresponding adjustments is recognised through a loss allowance account. For
investments in debt instruments that are measured at FVTOCI, the loss allowance is recognised
in OCI and accumulated in the FVTOCI reserve without reducing the carrying amounts of these
debt instruments. Such amount represents the changes in the FVTOCI reserve in relation to
accumulated loss allowance.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the transferred asset, the Group recognises
its retained interest in the asset and an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the
Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
F-265
342 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets (Continued)
Derecognition of financial assets (Continued)
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s
carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain
or loss previously accumulated in the FVTOCI reserve is reclassified to profit or loss.
On derecognition of an investment in equity instrument which the Group has elected on initial
recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments
revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the group after
deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds
received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No
gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s
own equity instruments.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method
or at FVTPL.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of
an acquirer in a business combination to which IFRS 3 applies, (ii) held for trading or (iii) it is designated
as at FVTPL.
F-266
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 343
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial liabilities and equity instruments (Continued)
Financial liabilities at FVTPL (Continued)
A financial liability is held for trading if:
it has been acquired principally for the purpose of repurchasing in the near term; or
on initial recognition it is a part of an identified portfolio of financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon
initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which
is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s
documented risk management or investment strategy, and information about the grouping is
provided internally on that basis; or
it forms part of a contract containing one or more embedded derivative, and IFRS 9 permits the
entire combined contract (assets or liability) to be designated as at FVTPL.
For financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the
financial liability that is attributable to changes in the credit risk of that liability is recognised in other
comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in
other comprehensive income would create or enlarge an accounting mismatch in profit or loss. For
financial liabilities that contain embedded derivatives, such as convertible loan notes, the changes in
fair value of the embedded derivatives are excluded in determining the amount to be presented in other
comprehensive income. Changes in fair value attributable to a financial liability’s credit risk that are
recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead,
they are transferred to retained earnings upon derecognition of the financial liability.
Financial liabilities at amortised cost
Financial liabilities including deposits from central banks, deposits from other banks, customer accounts,
borrowings, short-term financing bills payables, placements from other financial institutions, accounts
payable to brokerage clients, bond payables, financial assets sold under repurchase agreements, other
payables and amount due to a subsidiary are subsequently measured at amortised cost, using the
effective interest method.
F-267
344 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Derecognition/non-substantial modification of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or have expired. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in profit or loss.
For non-substantial modifications of financial liabilities that do not result in derecognition, the carrying
amount of the relevant financial liabilities will be calculated at the present value of the modified
contractual cash flows discounted at the financial liabilities’ original effective interest rate. Transaction
costs or fees incurred are adjusted to the carrying amount of the modified financial liabilities and are
amortised over the remaining term. Any adjustment to the carrying amount of the financial liability is
recognised in profit or loss at the date of modification.
Compound financial instruments
The component parts of the convertible loan notes issued by the Group are classified separately as
financial liabilities and equity in accordance with the substance of the contractual arrangements and
the definitions of a financial liability and an equity instrument. Conversion option that will be settled
by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s
own equity instruments is an equity instrument.
At the date of issue, both the debt component and derivative components are recognised at fair value.
In subsequent periods, the debt component of the convertible loan notes is carried at amortised cost
using the effective interest method. The derivative component is measured at fair value with changes
in fair value recognised in profit or loss.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognised and included
in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion
option classified as equity will remain in equity until the conversion option is exercised, in which
case, the balance recognised in equity will be transferred to share premium and share capital. Where
the conversion option remains unexercised at the maturity date of the convertible note, the balance
recognised in equity will be transferred to retained earnings. No gain or loss is recognised in profit or
loss upon conversion or expiration of the conversion option.
Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and
equity components in proportion to the allocation of the gross proceeds. Transaction costs relating
to the equity component are charged directly to equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability portion and amortised over the period
of the convertible loan notes using the effective interest method.
F-268
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 345
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Derivative financial instruments
Derivatives are initially recognised at fair value at the date when derivative contracts are entered into
and are subsequently remeasured to their fair value at the end of the reporting period. The resulting
gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective
as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the
nature of the hedge relationship.
All derivatives are recognised as assets when the fair value is positive and as liabilities when the fair
value is negative.
Embedded Derivative
Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of IFRS 9
are not separated. The entire hybrid contract is classified and subsequently measured in its entirety as
either amortised cost or fair value as appropriate.
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope
of IFRS 9 are treated as separate derivatives when they meet the definition of a derivative, their risks
and characteristics are not closely related to those of the host contracts and the host contracts are not
measured at FVTPL.
Generally, multiple embedded derivatives in a single instrument that are separated from the host
contracts are treated as a single compound embedded derivative unless those derivatives relate to
different risk exposures and are readily separable and independent of each other.
Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the net amount presented in the consolidated
statement of financial position when, and only when, the Group currently has a legally enforceable
right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
Financial assets sold under repurchase agreements and financial assets held under resale
agreements
Financial assets sold under repurchase agreements continue to be recognised, which do not result in
derecognition of the financial assets, and are recorded as “FVTOCI” or “FVTPL” as appropriate. The
corresponding liability is included in “financial assets sold under repurchase agreements”. Financial
assets held under resale agreements to resell are recorded as “financial assets held under resale
agreements”. Financial assets sold under repurchase agreements and financial assets held under resale
agreements are initially measured at fair value and are subsequently measured at amortised cost using
the effective interest method.
F-269
346 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Financial assets sold under repurchase agreements and financial assets held under resale
agreements (Continued)
Financial assets held under resale agreements
Financial assets that have been purchased under agreements with a commitment to resell at a specific
future date are not recognised in the statement of financial position. The cost of purchasing such assets
is presented under “financial assets held under resale agreements” in the consolidated statement of
financial position.
Financial assets sold under repurchase agreements
Financial assets sold subject to agreements with a commitment to repurchase at a specific future date
are not derecognised in the statement of financial position. The proceeds from selling such assets are
presented under “financial assets sold under repurchase agreements” in the consolidated statement
of financial position.
Hedge accounting
The Group designates certain derivatives and bank loans for cash flow hedges, or hedges of net
investments in foreign operations.
At the inception of the hedging relationship the Group documents the relationship between the
hedging instrument and the hedged item, along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing
basis, the Group documents whether the hedging instrument that is used in a hedging relationship is
highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to
the hedged risk.
Assessment of hedging relationship and effectiveness
For hedge effectiveness assessment, the Group considers whether the hedging instrument is effective
in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk,
which is when the hedging relationships meet all of the following hedge effectiveness requirements:
there is an economic relationship between the hedged item and the hedging instrument;
the effect of credit risk does not dominate the value changes that result from that economic
relationship; and
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of
the hedged item that the Group actually hedges and the quantity of the hedging instrument
that the entity actually uses to hedge that quantity of hedged item.
F-270
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 347
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Hedge accounting (Continued)
Assessment of hedging relationship and effectiveness (Continued)
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge
ratio but the risk management objective for that designated hedging relationship remains the same,
the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it
meets the qualifying criteria again.
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments
that are designated and qualify as cash flow hedges is recognised in other comprehensive income and
accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair
value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion
is recognised immediately in profit or loss, and is included in the other income and gains line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are
reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same
line as the recognised hedged item. However, when the hedged forecast transaction results in the
recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised
in other comprehensive income and accumulated in equity are removed from equity and included in
the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer
does not affect other comprehensive income. Furthermore, if the Group expects that some or all of the
loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is
immediately reclassified to profit or loss.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any
gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in
other comprehensive income and accumulated under the heading of translation reserve. The gain or
loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the
“other gains or losses” line item.
Gains or losses on the hedging instrument relating to the effective portion of hedge accumulated in
the translation reserve are reclassified to profit or loss on disposal of foreign operation.
Discontinuation of hedge accounting
The Group discontinues hedge accounting prospectively only when the hedging relationship (or a
part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes
instances when the hedging instrument expires or is sold, terminated or exercised. Discontinuing hedge
accounting can either affect a hedging relationship in its entirety or only a part of it (in which case
hedge accounting continues for the remainder of the hedging relationship).
F-271
348 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Financial instruments (Continued)
Hedge accounting (Continued)
Discontinuation of hedge accounting (Continued)
For cash flow hedge, any gain or loss recognised in other comprehensive income and accumulated in
equity at that time remains in equity and is recognised when the forecast transactions is ultimately
recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or
loss accumulated in equity is recognised immediately in profit or loss.
Securities lending
The Group lends investment securities to clients and the cash collaterals balance required under the
securities lending agreements and the interest arisen from these are classified as “accounts payable
to brokerage clients”. For those securities held by the Group lent to clients that do not result in the
derecognition of financial assets, they are included in related financial assets.
Financial guarantee contracts
Financial guarantee contract is contract that require the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance
with the terms of a debt instrument, namely the payment of principal and/or interests. Acceptance
includes the honour commitment made by the note sent to customers by the Group. Acceptance is listed
as a financial guarantee and credit commitment transaction and is disclosed as contingent liabilities
and commitments.
The financial guarantee contracts issued by a group entity are initially measured at their fair values and,
if not designed as at FVTPL, are subsequently measured at the higher of:
According to the amount of contractual obligations according to IAS 37; And
The amount initially recognised less, when appropriate, cumulative amortisation recognised in
accordance with the revenue recognition policies.
The financial guarantee contracts issued by Haitong Bank normally have a stated maturity date and a
periodic fee, usually paid in advance on a quarterly basis. This fee varies depending on the counterparty
risk, the amount and the term of the contract. Therefore, the fair value of the financial guarantee
contracts issued by Haitong Bank, at the inception date, equal the initial fee received, which is
recognised in the income statement over the period to which it relates. The subsequent periodic fees
are recognised in the income statement in period to which they relate.
F-272
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 349
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
3. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
(CONTINUED)
Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash
on hand and demand deposits, and short term highly liquid investments that are readily convertible
into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short
maturity of generally within three months when acquired, less bank overdrafts which are repayable on
demand and form an integral part of the Group’s cash management.
For the purpose of the consolidated statement of financial position, cash and bank balances comprise
cash on hand and at banks, including term deposits, which are not restricted as to use.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT
In the application of the Group’s accounting policies, which are described in Note 3, the directors of
the Company are required to make judgements estimates and assumptions about the carrying amounts
of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods.
Measurement of ECL
The Group regularly reviews its finance leases receivable, financial assets measurement at amortised cost
and debt instruments at fair value through other comprehensive income to assess ECL on a periodic
basis.
The Group estimates the amount of loss allowance for ECL on the above mentioned financial assets and
finance lease receivables, measuring as the asset’s carrying amount and the present value of estimated
future cash flows with the consideration of expected future credit loss of these financial assets and
finance lease receivables. The assessment of the credit risk involves high degree of estimation and
uncertainty. When the actual future cash flows are less than expected or more than expected, a material
impairment loss or a material reversal of impairment loss may arise, accordingly.
F-273
350 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT (CONTINUED)
Measurement of ECL (Continued)
The following significant judgements are required in applying the accounting requirements for
measuring the ECL:
Significant increase of credit risk
An asset moves to stage 2 when its credit risk has increased significantly since initial recognition. In
assessing whether the credit risk of an asset has significantly increased, the Group takes into account
qualitative and quantitative reasonable and supportable forward looking information, which are detailed
in note 76.
Models and assumptions used
The Group uses various models and assumptions in estimating ECL. Judgement is applied in identifying
the most appropriate model for each type of asset, as well as for determining the assumptions used
in these models, including assumptions that relate to key drivers of credit risk. Details are set out in
note 76.
Forward-looking information
When measuring ECL the Group uses reasonable and supportable forward looking information, which
is based on assumptions for the future movement of different economic drivers and how these drivers
will affect each other. Details are set out in note 76.
Probability of default (PD)
PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood of default over a given
time horizon, the calculation of which includes historical data, assumptions and expectations of future
conditions. Details are set out in note 76.
Loss given default (LGD)
LGD is an estimate of the loss arising on default. It is based on the difference between the contractual
cash flows due and those that the lender would expect to receive, taking into account cash flows from
collateral and integral credit enhancements. Details are set out in note 76.
Fair value measurement of financial instruments
If the market for a financial instrument is not active, the Group estimates fair value by using a valuation
technique. Valuation techniques include using recent prices in arm’s length market transactions between
knowledgeable and willing parties, if available, reference to the current fair value of another instrument
that is substantially the same, or discounted cash flow analyses and option pricing models. To the extent
practicable, valuation technique makes the maximum use of observable market inputs. However, where
observable market inputs are not available, management needs to make estimates and use alternatives
on such unobservable market inputs.
F-274
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 351
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT (CONTINUED)
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-
generating units to which goodwill has been allocated. The recoverable amount is the higher of an
asset’s fair value less costs of disposal and the present value of the estimated future cash flow expected
to be derived from the asset. The value in use calculation requires the Group to estimate the future
cash flows expected to arise from the cash-generating unit and an appropriate discount rate in order
to calculate the present value. Where the actual future cash flows are less than expected, a material
impairment loss may arise. Details of the recoverable amount calculation are set out in Note 24.
Principal versus agent consideration (principal)
The Group engages in commodity trading. The Group concluded that the Group acts as the principal
for such transactions as it controls the specified good before it is transferred to the customer after
taking into consideration indicators such as the Group is primarily responsible for fulfilling the promise
to provide the goods, and the Group has inventory risk.
Income taxes
There are certain transactions and activities for which the ultimate tax determination is uncertain during
the ordinary course of business. Where the final tax outcome of these matters is different from the
amounts that were initially estimated, such differences will impact the current income tax and deferred
income tax in the period during which such a determination is made.
Determination on classification of financial assets
Classification and measurement of financial assets depends on the result of whether the contractual
terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding and the business model test.
The Group determines the business model at a level that reflects how groups of financial assets are
managed together to achieve a particular business objective. This assessment includes judgement
reflecting all relevant evidence including how the performance of assets is evaluated and their
performance measured, the risks that affect the performance of assets and how these are managed
and how the managers of the assets are compensated. The Group monitors financial assets measured
at amortized cost or FVTOCI that are derecognized prior to their maturity to understand the reason
for their disposal and whether the reasons are consistent with the objective of the business for which
the assets was held. Monitoring is part of the Group’s continuous assessment of whether the business
model for which the remaining financial assets are held continues to be appropriate and if it is not
appropriate whether there has been a change in business model and so a prospective change to the
classification of those assets.
When the Group assesses whether the contractual cash flows of the financial assets are consistent with
basic lending arrangements, the main judgements are described as below: whether the principal amount
may change over the life of the financial asset (for example, if there are prepayments); whether the
interest includes only consideration for the time value of money, credit risk, other basic lending risks
and a profit margin and cost, associated with holding the financial asset for a particular period of time.
F-275
352 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENT (CONTINUED)
Consolidation of structured entities
All facts and circumstances must be taken into consideration in the assessment of whether the Group,
as an investor, controls the investee. The principle of control sets out the following three elements of
control: (a) power over the investee; (b) exposure, or rights, to variable returns from involvement with
the investee; and (c) the ability to use power over the investee to affect the amount of the investor’s
returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
For structured entities where the Group acts as manager or invests in, the Group considers the scope
of its decision-making authority and assesses whether the combination of investments it holds together
with its remuneration, credit enhancements and other interests creates exposure to variability of returns
from the activities of the structured entities that is of such significance that it indicates that the Group
is a principal. The structured entities are consolidated if the Group acts in the role of principal. Details
of consolidated structured entities and unconsolidated structured entities are set out in Notes 69 and
70 to the consolidated financial statements respectively.
5. SEGMENT REPORTING
Information reported to the chief operating decision maker (the “CODM”), being the board of directors
of the Company, for the purposes of resource allocation and assessment of segment performance
focuses on the nature of products sold and services provided by the Group, which is also consistent
with the Group’s basis of organization, whereby the businesses are organized and managed separately
as individual strategic business units that offers different products and serves different markets. With
changes in environment of security market and constant development of various business activities, the
Group will make adjustments to business segments in order to facilitate implementation of the Group’s
strategic planning and satisfy internal management in the meantime. The Group’s business segments
are classified in accordance with the requirements of IFRSs, and are based on the internal organization
structure, management requirements and internal reporting system. The reporting segments are
determined based on business segments. A business segment is a component of the Group with all
the following conditions satisfied: (1) such component is able to generate revenue and expenses in
the ordinary course of the Group, (2) management of the Group periodically evaluates the operating
results of these reporting segments to make decisions about resources to be allocated to the segments
and assess their performance; (3) the Group has access to such component’s accounting information
including financial position, operating results and cash flows. If two or more business segments have
similar economic characteristics or a similar business model, they may be combined as one business
segment. Based on its strategic planning and internal management requirements, the Group determines
six business segments: wealth management, investment banking, asset management, trading and
institution, finance lease and others. Classification of reporting segments is consistent with that of
business segments.
F-276
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 353
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
5. SEGMENT REPORTING (CONTINUED)
Segment information is measured in accordance with the accounting policies and measurement criteria
adopted by each segment when reporting to management, which are consistent with the accounting
and measurement criteria in the preparation of the consolidated financial statements.
Specifically, the Group’s operating segments are as follows:
(1) Wealth Management Segment engages in provision of a full range of financial services and
investment solutions to retail and high net-worth clients. Services provided include brokering and
dealing in securities and futures, investment consulting, wealth management as well as financial
services such as margin financing, security lending, stock pledge, etc.;
(2) Investment Banking Segment engages in provision of sponsoring and underwriting services to
enterprises and government clients for their fund raising activities in equity and debt capital
markets, and also engages in provision financial consulting services for enterprises for their
corporate actions such as merger and assets restructuring services as well as provision of services
related to the National Equities Exchange and Quotations;
(3) Asset Management Segment engages in provision of investment management services on
diversified and comprehensive investment products including asset management, fund
management, and private equity management to individual, corporate and institutional clients;
(4) Trading and Institution Segment engages in provision of stock sales and trading, prime brokerage,
stock lending, and stock research in financial markets across the world to global institutional
clients, and also engages in provision of market – making services for fixed income, currency
and commodity products, futures and options, and derivatives on major exchanges around the
world. At the same time, through investment funds and private equity projects, we enhance the
synergistic advantages of all business divisions of the group, and focus on exploring investment
opportunities with reasonable capital returns, so as to expand customer relations and promote
the overall growth of the group’s business;
(5) Finance Lease Segment engages in provision of innovative financial solutions, including finance
lease, operating lease, factoring, entrustment loans and relevant consulting to individuals,
enterprises and government clients;
(6) Others Segment engages in provision of other comprehensive financial and information services
to institutions clients, including warehouse receipts pledge service, etc.
Segment profit/loss represents the profit earned by/loss measured by each segment without allocation
of income tax expenses. This is the measure reported to CODM for the purposes of resource allocation
and performance assessment.
Share of results of associates and joint ventures are allocated to segment profit/loss while the
corresponding investments in associates and joint ventures are not allocated to each segment.
F-277
354 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
5. SEGMENT REPORTING (CONTINUED)
The segment information provided to the CODM for the operating and reportable segments for the
years ended 31 December 2022 and 2021 is as follows:
Operating and Reportable segment
For the year ended 31 December 2022
Wealth Investment Asset Trading and Consolidated
management banking management institution Finance lease Others total
Segment revenue and results
Revenue 15,073,950 4,532,650 2,729,749 4,202,741 6,898,278 14,436 33,451,804
Other income and gains 179,389 118,528 128,362 262,161 2,075,351 5,764,626 8,528,417
Segment revenue 15,253,339 4,651,178 2,858,111 4,464,902 8,973,629 5,779,062 41,980,221
Segment expenses 8,842,013 2,469,615 1,661,387 8,687,516 7,222,429 5,884,806 34,767,766
Segment results 6,411,326 2,181,563 1,196,724 (4,222,614) 1,751,200 (105,744) 7,212,455
Share of results of associates and
joint ventures – – 573,871 212,710 – – 786,581
Segment profit before income tax 6,411,326 2,181,563 1,770,595 (4,009,904) 1,751,200 (105,744) 7,999,036
Segment assets and liabilities
Segment assets 240,892,803 12,623,014 19,228,728 338,812,314 127,115,674 3,211,378 741,883,911
Investments accounted for using
equity method – – 2,151,252 4,862,462 – – 7,013,714
Deferred tax assets 4,709,952
Group’s total assets 753,607,577
Segment liabilities 174,522,907 11,665,090 14,673,609 260,136,584 113,871,144 206,726 575,076,060
Deferred tax liabilities 909,459
Group’s total liabilities 575,985,519
Other segment information
(Amounts included in the measure
of segment profit or loss)
Depreciation and amortization 463,304 195,329 191,127 312,948 371,903 46,817 1,581,428
Capital expenditure 452,065 233,589 90,848 2,172,316 1,689,095 19,522 4,657,435
Impairment losses under expected
credit loss model (462,311) 115,361 (45,391) 469,910 1,578,563 9,517 1,665,649
Impairment losses on other assets – – – 6,551 58,570 – 65,121
F-278
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 355
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
5. SEGMENT REPORTING (CONTINUED)
Operating and Reportable segment (Continued)
For the year ended 31 December 2021
Wealth Investment Asset Trading and Consolidated
management banking management institution Finance lease Others total
Segment revenue and results
Revenue 17,143,395 5,439,731 3,997,179 15,313,123 6,501,470 9,074 48,403,972
Other income and gains 348,122 276,163 151,681 354,141 2,376,176 5,899,306 9,405,589
Segment revenue 17,491,517 5,715,894 4,148,860 15,667,264 8,877,646 5,908,380 57,809,561
Segment expenses 12,556,507 2,721,431 2,372,493 10,008,524 7,284,804 5,971,892 40,915,651
Segment results 4,935,010 2,994,463 1,776,367 5,658,740 1,592,842 (63,512) 16,893,910
Share of results of associates and
joint ventures – – 712,172 937,717 – – 1,649,889
Segment profit before income tax 4,935,010 2,994,463 2,488,539 6,596,457 1,592,842 (63,512) 18,543,799
Segment assets and liabilities
Segment assets 241,389,287 10,094,708 13,824,798 350,203,976 114,017,446 3,768,589 733,298,804
Investments accounted for using
equity method – – 1,957,895 4,496,525 – – 6,454,420
Deferred tax assets 5,171,925
Group’s total assets 744,925,149
Segment liabilities 192,472,695 9,040,397 7,705,572 250,499,642 106,049,411 81,995 565,849,712
Deferred tax liabilities 1,320,651
Group’s total liabilities 567,170,363
Other segment information (Amounts
included in the measure of segment
profit or loss)
Depreciation and amortization 388,042 155,892 174,906 357,780 416,472 76,249 1,569,341
Capital expenditure 507,641 193,071 29,973 336,422 654,185 77,955 1,799,247
Impairment losses under expected
credit loss model 1,125,388 121,804 177,095 210,187 1,717,445 (245) 3,351,674
Impairment losses on other assets – – – 414,645 85,566 (1,043) 499,168
F-279
356 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
5. SEGMENT REPORTING (CONTINUED)
Operating and Reportable segment (Continued)
The Group operates mainly in three principal geographical areas, the mainland China (representing the
location of majority of the income from external customers and non-current assets of the Group), Hong
Kong and Europe (the operation area of Group’s subsidiary). No single customers contribute more than
10% of income to the Group’s income for the years ended 31 December 2022 and 2021.
6. COMMISSION AND FEE INCOME
2022 2021
Securities, futures and options dealing and broking fee income 7,645,318 9,668,840
Underwriting and sponsors fee 3,952,650 4,578,454
Asset management fee income (including fund management fee
income) 2,305,142 3,691,479
Financial advisory and consultancy fee income 632,859 651,515
Others 132,705 172,446
14,668,674 18,762,734
The major business types of commission and fee income from customers are as follows:
(1) Brokerage
The Group provides broking, dealing and handling services for securities, futures and options
contracts. Commission income is recognized at a point in time on the execution date of the
trades at a certain percentage of the transaction value of the trades executed.
(2) Investment Banking
The Group provides placing, underwriting or sub-underwriting services to customers for their fund
raising activities in equity and debt capital markets, and also structured products arrangement
services. Revenue is recognized at a point in time when the relevant placing, underwriting,
sub-underwriting or structured products arrangement activities are completed. The Group also
provides sponsoring services to clients for their fund raising activities and corporate advisory
services to corporate clients for their corporate actions. The Group considers that all the services
promised in a particular contract of being a sponsor or corporate advisor are interdependent and
interrelated and should therefore be accounted for as a single performance obligation.
F-280
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 357
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
6. COMMISSION AND FEE INCOME (CONTINUED)
(3) Asset management
The Group provides asset management and investment advisory services on diversified and
comprehensive investment products to customers. The customers simultaneously receive and
consumes the benefit provided by the Group, hence the revenue is recognized as a performance
obligation satisfied over time. Asset management fee income is charged at a fixed percentage
per month of the net asset value of the managed accounts under management of the Group.
The Group is also entitled to a performance fee when there is a positive performance for the
relevant performance period and it is recognized at the end of the relevant performance period,
when it is highly probable that a significant reversal in the amount of cumulative revenue
recognized will not occur and when the uncertainty associated with the variable consideration
is subsequently resolved.
As at 31 December 2022, the Group’s most contracts with customers have original expected duration
of less than one year.
7. INTEREST INCOME
2022 2021
Bank interest income 3,658,856 3,212,034
Interest income from advances to customers on margin financing 4,644,128 5,325,547
Interest income from loans and receivable 1,179,067 1,241,489
Interest income from financial assets held under resale agreements 2,061,244 2,203,203
Interest income from debt instruments at fair value through other
comprehensive income and amortised cost 1,534,754 903,940
Interest income from receivables arising from sale and leaseback
arrangements 4,408,262 2,730,138
Other interest income 28,466 9,625
17,514,777 15,625,976
Finance lease income 2,302,792 3,336,406
F-281
358 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
8. INVESTMENT INCOME AND GAINS (NET)
2022 2021
Net realised gains arising from financial assets/liabilities
at fair value through profit or loss 1,655,595 10,308,037
Fair value change of financial instruments at fair value through
profit or loss (3,056,495) 290,515
Dividend income from equity instruments at fair value through
other comprehensive income 156,024 1,195,069
Net gains/(losses) arising from debt instruments at fair value through
other comprehensive income 193,643 (620,788)
Others 16,794 (493,977)
(1,034,439) 10,678,856
9. OTHER INCOME AND GAINS
2022 2021
Income from commodity trading 5,742,280 5,865,706
Service fee income from finance lease 1,142,427 1,281,696
Government grants 767,823 725,782
Rental income from operating lease 540,145 451,145
Foreign exchange (losses)/gains (425,400) 279,938
Rental income from investment properties 13,330 12,583
Others 747,812 788,739
8,528,417 9,405,589
10. COMMISSION AND FEE EXPENSES
2022 2021
Securities and futures dealing and broking expenses 2,733,794 3,230,145
Commission expenses 238,036 414,479
Services expenses for underwriting, financial advisory and others 111,805 126,013
3,083,635 3,770,637
F-282
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 359
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
11. INTEREST EXPENSES
2022 2021
Interest expenses for:
– Borrowings and overdrafts 2,950,843 2,523,845
– Deposit taken from banks and other financial institutions 162,550 139,355
– Financial assets sold under repurchase agreements 1,951,565 1,666,352
– Accounts payable to brokerage clients 733,336 650,961
– Advances from China Securities Finance
Corporation Ltd. (“CSFC”) 350,117 352,369
– Bonds payables and short-term financing bills payable 6,684,671 6,344,323
– Lease liabilities 40,479 41,531
– Others 734,149 622,883
13,607,710 12,341,619
12. DEPRECIATION AND AMORTISATION
2022 2021
Depreciation of property and equipment 906,392 892,585
Depreciation for right-of-use assets 444,470 482,321
Depreciation of investment properties 40,709 3,348
Amortisation of other intangible assets 189,857 191,087
1,581,428 1,569,341
13. STAFF COSTS
2022 2021
Staff costs (including directors’ remuneration (Note 71))
Salaries, bonus and allowances 4,157,505 7,629,206
Contributions to annuity plans and retirement schemes (i) 1,163,325 966,816
Other social welfare 464,439 429,228
5,785,269 9,025,250
(i) The domestic employees of the Group in the PRC participate in a state-managed retirement benefit scheme
operated by the respective local government in the PRC. Apart from the state-managed retirement benefit
scheme, the Group also makes monthly contributions to annuity plans at fixed rates of the employees’ salaries
and bonuses for the period. The Group operates a post-retirement scheme for its qualifying employees in
Hong Kong under the Mandatory Provident Fund Schemes Ordinance. The Group’s contributions to these
post-retirement plans are charged to profit or loss in the period to which they relate.
F-283
360 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
13. STAFF COSTS (CONTINUED)
The Group’s subsidiary in Portugal operated a defined benefit scheme. The retirement pension liabilities
are calculated semi-annually, in 31 December and 30 June of each year, for each plan individually, using
the Projected Unit Credit Method, being annually reviewed by qualified independent actuaries of Mercer
(Portugal) Lda. The discount rate used in this calculation is determined with reference to market rates
associated with high-quality corporate bonds, denominated in the currency in which the benefits will
be paid out and with a maturity similar to the expiry date of the plan’s liabilities. As at 31 December
2022, the actuarial valuations indicate that the fair value of plan assets of the Group’s subsidiary in
Portugal represents a liability financing level of 151.25 per cent (31 December 2021: 112.37 per cent).
As at 31 December 2022, the present value of defined benefit obligations and fair value of plan assets
in respect of this scheme amounted to EUR 32,916 thousand equivalent to RMB244,332 thousand
(31 December 2021: EUR 50,066 thousand equivalent to RMB361,462 thousand) and EUR 49,786
thousand equivalent to RMB369,557 thousand (31 December 2021: EUR 56,260 thousand equivalent
to RMB406,180 thousand) respectively.
Share option award of subsidiaries is disclosed in Note 73.
14. IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL
2022 2021
ECL in respect of:
– Finance lease receivables 1,195,233 1,062,882
– Receivables arising from sale and leaseback arrangements 503,013 315,609
– Advances to customers on margin financing 439,044 485,262
– Financial assets held under resale agreements (953,836) 781,956
– Other loans and receivables 342,906 512,580
– Debt instruments at amortised cost (1,915) 10,462
– Debt instruments at fair value through other comprehensive
income (63,908) 83,512
– Loans and advances 6,599 1,124
– Other financial assets and other items 198,513 98,287
1,665,649 3,351,674
F-284
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 361
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
15. IMPAIRMENT LOSSES ON OTHER ASSETS
2022 2021
Property and equipment 4,945 46,616
Goodwill – 414,645
Other assets 60,176 37,907
65,121 499,168
16. OTHER EXPENSES
2022 2021
Cost of commodity trading 5,728,277 5,769,173
Administrative expenses 2,877,454 3,864,814
Taxes and surcharges 241,045 284,499
Others 132,178 439,476
8,978,954 10,357,962
17. INCOME TAX EXPENSE
2022 2021
Current tax 2,346,264 5,003,791
Deferred tax 456,622 (207,854)
2,802,886 4,795,937
Under the Law of the People’s Republic of China on Enterprise Income Tax (the “EIT Law”) and
Implementation Regulation of the EIT Law, the tax rate is 25% from 1 January 2008.
The subsidiaries of the Group operated in Hong Kong are subject to Hong Kong Profits Tax, which is
calculated at 16.5% on the estimated assessable profits arising in Hong Kong.
Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
F-285
362 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
17. INCOME TAX EXPENSE (CONTINUED)
A reconciliation of the tax expense applicable to profit before income tax using the applicable rate to
the tax expense at the effective tax rate is as follows:
2022 2021
Profit before income tax 7,999,036 18,543,799
Tax at the statutory tax rate of 25% 1,999,759 4,635,950
Effect of share of results of associates and joint ventures (191,638) (121,984)
Tax effect of expenses not deductible for tax purpose 975,169 562,203
Tax effect of income not taxable for tax purpose (1,142,877) (643,617)
Over provision in prior years 62,412 (19,536)
Utilisation of tax losses previously not recognised (209,473) (93,238)
Tax effect of tax losses and deductible temporary differences
not recognised 734,709 482,810
Effect of different tax rates of subsidiaries operating
in other jurisdictions 574,825 (6,651)
Tax charge 2,802,886 4,795,937
18. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share attributable to shareholders of the Company
is as follows:
2022 2021
Earnings for the purpose of basic earnings per share:
Profit for the year attributable to shareholders of the Company 6,545,347 12,826,517
Effect of dilutive potential ordinary shares:
Adjustment to the share of profit of subsidiaries based on dilution
of their earnings per share (Note) – (151)
Earnings for the purpose of diluted earnings per share 6,545,347 12,826,366
Number of shares for basic and diluted earnings per share:
Number of shares in issue (in thousand) 13,064,200 13,064,200
Basic earnings per share (expressed in RMB per share) 0.50 0.98
Diluted earnings per share (expressed in RMB per share) 0.50 0.98
F-286
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 363
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
18. EARNINGS PER SHARE (CONTINUED)
Note: The calculation of diluted earnings per share is based on the profit for the period attributable to ordinary
equity holders of the parent. The diluted profits of the Group takes into account the potential impact of both
convertible bonds issued by a subsidiary of the Company and various share option or share awards schemes
operated by a subsidiary of the Company, assuming outstanding convertible bonds were fully converted to
ordinary shares and additional shares were issued to relevant employees of each subsidiary on the first day
of the year.
19. PROPERTY AND EQUIPMENT
Furniture,
Land and Leasehold Electronic Transportation fixtures and Construction
buildings improvements equipment equipment equipment in progress Total
Cost
As at 1 January 2022 9,518,750 888,291 1,756,610 6,212,464 298,082 330,123 19,004,320
Additions during the year 1,756,490 84,481 270,997 4,702 39,081 182,911 2,338,662
Disposals during the year – (47,232) (75,700) (7,922) (17,423) (14) (148,291)
Transfer during the year – 53,378 2,879 – 16,601 (72,858) –
Exchange difference 38,145 13,261 21,741 559,227 7,532 402 640,308
As at 31 December 2022 11,313,385 992,179 1,976,527 6,768,471 343,873 440,564 21,834,999
Accumulated depreciation
As at 1 January 2022 952,231 633,768 1,192,217 859,267 201,318 – 3,838,801
Provided for the year 276,891 111,871 227,011 265,760 24,859 – 906,392
Eliminated on disposals – (31,900) (71,809) (7,657) (16,278) – (127,644)
Exchange difference 4,984 10,635 18,213 75,043 5,901 – 114,776
As at 31 December 2022 1,234,106 724,374 1,365,632 1,192,413 215,800 – 4,732,325
Allowance for impairment losses
As at 1 January 2022 30,382 – – 46,261 – – 76,643
Provided for the year – – 4,271 – 674 – 4,945
Exchange differences – – 155 4,273 24 – 4,452
As at 31 December 2022 30,382 – 4,426 50,534 698 – 86,040
Carrying amount
As at 31 December 2022 10,048,897 267,805 606,469 5,525,524 127,375 440,564 17,016,634
As at 31 December 2021 8,536,137 254,523 564,393 5,306,936 96,764 330,123 15,088,876
F-287
364 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
19. PROPERTY AND EQUIPMENT (CONTINUED)
Transportation equipment of the Group includes aircraft held for operating lease businesses, as at
31 December 2022, the cost of aircraft amounts to RMB6,173,592 thousand (31 December 2021:
RMB5,651,577 thousand), accumulated depreciation amounts to RMB829,587 thousand (31 December
2021: RMB555,394 thousand), allowance for impairment losses amounts to RMB50,534 thousand (31
December 2021: RMB46,261 thousand), and the carrying amounts of aircraft amounts to RMB5,293,471
thousand (31 December 2021: RMB5,049,922 thousand).
As at 31 December 2022, buildings amounted to RMB28,259 thousand were yet to obtain the relevant
land and building certificates (31 December 2021: RMB 29,460 thousand).
20. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Right-of-use assets
Leasehold
land and Electronic Transportation
buildings equipment equipment Others Total
Cost
As at 1 January 2022 2,992,253 803 4,160 2,108 2,999,324
Additions during the year 450,285 – 241 317 450,843
Decreases during the year (803,531) – (1,287) (60) (804,878)
Exchange difference 56,497 (177) (497) (8) 55,815
As at 31 December 2022 2,695,504 626 2,617 2,357 2,701,104
Accumulated amortisation
As at 1 January 2022 1,217,362 215 1,965 1,143 1,220,685
Provided for the year 442,812 195 831 632 444,470
Decreases during the year (696,142) – (1,055) (59) (697,256)
Exchange difference 23,062 (115) (268) (3) 22,676
As at 31 December 2022 987,094 295 1,473 1,713 990,575
Carrying amount
As at 31 December 2022 1,708,410 331 1,144 644 1,710,529
As at 31 December 2021 1,774,891 588 2,195 965 1,778,639
F-288
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 365
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
20. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (CONTINUED)
Lease liabilities
2022/12/31 2021/12/31
Within 1 year 279,881 307,759
1 to 2 years 204,320 238,764
2 to 5 years 300,301 249,731
More than 5 years 231,198 250,925
1,015,700 1,047,179
Amount due for settlement with 12 months shown under
current liabilities 279,881 307,759
Amount due for settlement after 12 months shown under
non-current liabilities 735,819 739,420
The Group leases various land and buildings, electronic equipment, transportation equipment and others
for its operations. Most lease contracts are entered into for terms from 1 year to 40 years. Lease terms
are negotiated on an individual basis and contain a wide range of different terms and conditions. In
determining the lease term and assessing the length of the non-cancellable period, the Group applies
the definition of a contract and determines the period for which the contract is enforceable.
For the year ended 31 December 2022, total cash outflow for leases amounts to RMB478,620 thousand
(for the year ended 31 December 2021: RMB568,569 thousand).
For the year ended 31 December 2022, interest expenses for lease liabilities amounts to RMB40,479
thousand (for the year ended 31 December 2021: RMB41,532 thousand).
As at 31 December 2022, the lease agreements do not impose any covenants other than the security
interests in the leased assets that are held by the lessor. Leased assets may not be used as security for
borrowing purposes.
As at 31 December 2022, the Group did not enter into any significant lease that is not yet commenced.
F-289
366 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
21. INVESTMENT PROPERTIES
2022/12/31 2021/12/31
Cost
At beginning of the year 86,062 143,241
Transfer in during the period – 5,138
Addition during the year 2,518,099 –
Transfer to property and equipment – (60,631)
Exchange difference 106,605 (1,686)
At end of the year 2,710,766 86,062
Accumulated depreciation
At beginning of the year 28,467 31,649
Transfer in during the period – 2,486
Provided for the year 40,709 3,348
Transfer to property and equipment – (9,016)
Exchange difference – –
At end of the year 69,176 28,467
Carrying amount
At end of the year 2,641,590 57,595
The fair values of the Group’s investment properties as at 31 December 2022 were RMB3,385,023
thousand (31 December 2021: RMB308,710 thousand). The fair values have been determined by the
directors of the Company by reference to recent market prices for similar properties in the same or
similar locations and conditions. Fair values disclosed above are categorized as Level 3.
F-290
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 367
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
22. GOODWILL
Cost and carrying values
31 December Exchange 31 December
2021 adjustments 2022
Goodwill
Haitong Futures Co., Ltd. 5,896 – 5,896
Haitong International Securities Group Limited 641,800 59,400 701,200
Haitong UT Capital Group Co., Ltd. 2,047,416 189,491 2,236,907
Haitong International Holdings (UK) Limited 120,877 11,187 132,064
Haitong Bank, S.A. 953,606 88,258 1,041,864
Haitong International Financial Services
(Singapore) Pte. Ltd. 4,518 418 4,936
3,774,113 348,754 4,122,867
Less: impairment losses
Haitong Bank, S.A. (408,800) (37,836) (446,636)
3,365,313 310,918 3,676,231
Particulars regarding impairment testing on goodwill are disclosed in Note 24.
23. OTHER INTANGIBLE ASSETS
Trading Computer Construction
rights software Others in progress Total
Cost
As at 1 January 2022 224,043 1,745,004 107,023 29,403 2,105,473
Additions during the year – 214,425 100 8,876 223,401
Disposals during the year – (11,778) – – (11,778)
Transfer during the year – 13,488 – (13,488) –
Exchange difference 576 46,786 3,726 350 51,438
As at 31 December 2022 224,619 2,007,925 110,849 25,141 2,368,534
Accumulated amortisation
As at 1 January 2022 116,601 1,377,802 79,679 – 1,574,082
Provided for the year – 183,421 6,436 – 189,857
Eliminated on disposals – (11,400) – – (11,400)
Exchange difference – 42,888 3,101 – 45,989
As at 31 December 2022 116,601 1,592,711 89,216 – 1,798,528
Carrying amount
As at 31 December 2022 108,018 415,214 21,633 25,141 570,006
F-291
368 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
23. OTHER INTANGIBLE ASSETS (CONTINUED)
Trading Computer Construction
rights software Others in progress Total
Cost
As at 1 January 2021 224,226 1,614,796 108,927 27,154 1,975,103
Additions during the year – 170,478 – 5,914 176,392
Disposals during the year – (3,045) (10) (566) (3,621)
Transfer during the year – 2,140 – (2,140) –
Exchange difference (183) (39,365) (1,894) (959) (42,401)
As at 31 December 2021 224,043 1,745,004 107,023 29,403 2,105,473
Accumulated amortisation
As at 1 January 2021 116,601 1,231,502 75,036 – 1,423,139
Provided for the year – 184,896 6,191 – 191,087
Eliminated on disposals – (3,045) (10) – (3,055)
Exchange difference – (35,551) (1,538) – (37,089)
As at 31 December 2021 116,601 1,377,802 79,679 – 1,574,082
Carrying amount
As at 31 December 2021 107,442 367,202 27,344 29,403 531,391
Trading rights mainly comprise the trading rights in the Shanghai Stock Exchange, the Shenzhen Stock
Exchange, the Hong Kong Exchanges and Clearing Limited and the Hong Kong Futures Exchange Limited
which allow the Group to trade securities and futures contracts on or through these exchanges. The
Group treats trading rights as intangible assets with infinite useful lives.
F-292
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 369
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
24. IMPAIRMENT TESTING ON GOODWILL AND TRADING RIGHTS WITH
INDEFINITE USEFUL LIVES
Impairment testing on goodwill
For the purpose of impairment testing, goodwill set out in Note 22 has been allocated into six individual
cash generating units (CGUs), including one subsidiary in Shanghai (“Unit A”), one subsidiary in Hong
Kong (“Unit B”), one subsidiary with headquarters in Hong Kong and operation mainly in Shanghai
(“Unit C”), one subsidiary with headquarters in Portugal (“Unit D”), one subsidiary with headquarters
in Japan (“Unit E”) and one subsidiary in Singapore (“Unit F”). The carrying amounts of goodwill as at
31 December 2022 and 31 December 2021 allocated to these units are as follows:
2022/12/31 2021/12/31
Unit A – Haitong Futures Co., Ltd. 5,896 5,896
Unit B – Haitong International Securities Group Limited 701,200 641,800
Unit C – Haitong UT Capital Group Co., Limited 2,236,907 2,047,416
Unit D – Haitong Bank S.A. 595,228 544,806
Unit E – Haitong International Holdings (UK) Limited
(formerly “Japaninvest Group plc”) 132,064 120,877
Unit F – Haitong International Financial Services (Singapore) Pte. Ltd. 4,936 4,518
3,676,231 3,365,313
During the year ended 31 December 2022, management of the Group determined that there were no
impairments of any of its CGUs containing goodwill as the recoverable amounts of Unit A, Unit B, Unit
C, Unit D, Unit E and Unit F exceed their respective carrying amounts.
The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are
summarized below:
The recoverable amounts of Unit A, Unit B, Unit C, Unit D, Unit E and Unit F have been determined
on the basis of value in use calculation. That calculation uses cash flow projections based on financial
budgets approved by management and at a discount rate (before tax) of 13.33% to 22.39% for Unit
A, Unit B, Unit C, Unit D, Unit E and Unit F, as at 31 December 2022. The discount rates used reflect
specific risks relating to the relevant CGUs.
Other key assumptions for the value in use calculations relate to the estimation of cash inflows/outflows
which include budgeted income, gross margin and perpetual growth rate, such estimation is based on
the units’ past performance and management’s expectations for the market development. The growth
rates for the forecast period ranged from 2.00% to 41.03%. The terminal growth rates ranged from
2.00% to 3.20%.
Management of the Group believes that any reasonably possible change in any of these assumptions
would not cause the aggregate carrying amounts of Unit A, Unit B, Unit C, Unit D, Unit E or Unit F to
exceed their respective aggregate recoverable amounts.
F-293
370 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
24. IMPAIRMENT TESTING ON GOODWILL AND TRADING RIGHTS WITH
INDEFINITE USEFUL LIVES (CONTINUED)
Impairment testing on trading rights with indefinite useful lives
The trading rights held by the Group are considered by the directors of the Company as having indefinite
useful lives because they are expected to contribute net cash inflows indefinitely. The trading rights
will not be amortised until their useful lives are determined to be finite. Instead, they will be tested for
impairment annually and whenever there is an indication that they may be impaired. The respective
recoverable amounts of the three cash generating units relating to brokerage business whereby
these trading rights are allocated to, using a value in use calculation, exceed the carrying amounts.
Accordingly, there is no impairment of the trading rights as at 31 December 2022 and 2021.
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
2022/12/31 2021/12/31
Cost of unlisted investments in associates and joint ventures 4,312,766 4,082,549
Share of post-acquisition profits and other comprehensive income,
net of dividends received 2,700,948 2,371,871
Total 7,013,714 6,454,420
Details of investments accounted for using equity method:
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2022/12/31 2021/12/31
PRC Equity investment; 0.00% 50.00%
( )(Note iv) Investment
Shanghai Tongguan Investment management
Management (Limited services
Partnership)*
PRC Equity investment 20.00% 20.00%
( )
Liaoning China-Germany
Industrial Equity Investment Fund
(Limited Partnership)
F-294
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 371
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2022/12/31 2021/12/31
PRC Fund management 27.78% 27.78%
Fullgoal Fund Management
Co., Ltd.*
PRC Equity investment 35.71% 35.71%
Jilin Modern Agricultural and
Emerging Markets Investment
Fund Limited*
PRC Equity investment 37.06% 37.06%
Xi’an Aerospace and New Energy
Industry Fund*
PRC Equity investment 45.49% 45.49%
( )
Shanghai Cultural Industries
Investment Fund (Limited
Partnership)*
PRC Equity investment 35.33% 35.33%
( )
Shanghai Equity Investment Fund
(Limited Partnership)*
( ) PRC Equity investment 35.37% 35.37%
( )
Haitong (Jilin) Modern Service
Industry Investment Fund (Limited
Partnership)*
( ) ( PRC Equity investment 28.63% 28.63%
)
Haitong Xingtai (Anhui) Emerging
Industry Investment Fund (Limited
Partnership)*
F-295
372 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2022/12/31 2021/12/31
( ) PRC Equity investment 39.95% 34.95%
( )
Haitong Qidong (Weihai) Equity
Investment Fund (Limited
Partnership)*
( PRC Equity investment 28.18% 28.18%
)
Guangdong South Media Integration
Fund (Limited Partnership)*
( ) PRC Private equity funds 22.46% 22.46%
( ) investment
Haitong (Jilin) Equity Investment
Fund (Limited Partnership)*
PRC Investment 24.24% 24.24%
management
Xi’an Civil-Military Integration
Satellite Investment Fund
Co., Ltd.*
PRC Equity investment; 19.39% 19.39%
( ) Investment
Jiaxing Haitong Xuchu Equity management
Investment Fund (Limited services
Partnership)*
PRC Equity investment 20.00% 20.00%
( )
Shanghai Equity Investment
Fund II (Limited Partnership)*
PRC Equity investment 20.00% 20.00%
( )
Liaoning Haitong New Drivers Equity
Investment Fund
(Limited Partnership)*
F-296
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 373
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2022/12/31 2021/12/31
PRC Equity investment 20.00% 20.00%
( )
Xuchang Haitong Innovation Equity
Investment Fund
(Limited Partnership)*
PRC Equity investment 20.00% 20.00%
( )
Jilin Haitong Innovation
Satellite Investment Center
(Limited Partnership)*
PRC Equity investment 20.00% 20.00%
( )
Hefei Haitong Huiyin Equity
Investment Partnership (Limited
Partnership)*
( ) PRC Equity investment 40.00% 40.00%
( )
SME Development Fund Haitong
(Hefei) Partnership (Limited
Partnership)*
PRC Equity Investment 19.61% 19.61%
( )
Xi’an Aerospace Haitong Innovative
New Materials Equity Investment
Partnership (Limited Partnership)*
PRC Equity Investment 18.19% 20.00%
( )
CCTV Financial Media Industry
Investment Fund (Limited
Partnership)*
PRC Equity investment 49.90% 49.90%
Liaoning Haitong New Energy
Low-carbon Industry Equity
Investment Co., Ltd.*
F-297
374 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Place of Principal Proportion of
Name of entity establishment activities ownership interest
2022/12/31 2021/12/31
( ) ( PRC Equity investment 20.00% 0.00%
)
Haitong (Linyi) Equity Investment
Fund partnership (Limited
Partnership)*
PRC Equity investment 20.00% 0.00%
( )
Anhui Province Wanneng Haitong
dual-carbon Industry M & A
Investment Fund Partnership
(Limited Partnership)*
PRC Equity investment 30.00% 0.00%
( )
Yancheng Sino Korean Industrial
Park Phase II Investment Fund
(Limited Partnership)
PRC Equity investment 19.51% 0.00%
( )
Jinhua Haitong Key Industry
Development Investment
Promotion M & A Investment
Partnership (Limited Partnership)*
( ) PRC Equity investment 19.02% 0.00%
Jilin Haichuang Changxin
Investment Center (Limited
Partnership)*
PRC Equity investment 19.51% 0.00%
( )
Shanghai Haitong Zhida Private
Investment Fund Partnership
(Limited Partnership)*
PRC Equity investment 22.56% 0.00%
( )
Shanghai Haitong Huanxin Private
Investment Fund Partnership
(Limited Partnership)*
F-298
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 375
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
25. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (CONTINUED)
Notes:
(i) *The English translated name are for identification only.
(ii) All of these associates and joint ventures are unlisted entities without quoted market price available.
(iii) All of these associates and joint ventures are accounted for using the equity method in these consolidated
financial statements.
(iv) Shanghai Tongguan Investment Management (Limited Partnership) was registered in PRC and discontinued
operation in January 2022.
Fullgoal Fund Management Co., Ltd., as a major associate of the Group, is primarily engaged in provision
of fund management and fund trading distribution services, and is accounted for using the equity
method. The Group holds 27.775% of the shares in Fullgoal Fund Management Co., Ltd. The financial
information for the year ended 31 December 2022 is as follows:
Fullgoal Fund Management Co., Ltd.
2022/12/31 2021/12/31
Total assets 13,070,529 12,646,262
Total liabilities 5,325,337 5,597,222
Net assets 7,745,192 7,049,040
Revenue for the year 7,358,870 8,306,072
Profit for the year 2,066,140 2,564,075
Total comprehensive income 2,096,153 2,556,119
Aggregate information of associates and joint ventures that are not individually material:
2022/12/31 2021/12/31
The Group’s share of gain 212,710 937,718
The Group’s share of other comprehensive income – 17
The Group’s share of total comprehensive income 212,710 937,735
Aggregate carrying amount of the Group’s interests in these
associates and joint ventures 4,862,462 4,496,525
F-299
376 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
26. FINANCE LEASE RECEIVABLES
2022/12/31 2021/12/31
Minimum finance lease receivables
– Within one year 14,822,054 25,533,151
– In the second year 4,761,042 9,925,219
– In the third year 1,324,033 1,871,410
– In the fourth year 565,995 396,805
– In the fifth year 446,252 296,806
– After five years 1,586,042 597,410
Gross amount of finance lease receivables 23,505,418 38,620,801
Less: Unearned finance lease income (2,457,073) (3,584,005)
Present value of minimum finance lease receivables 21,048,345 35,036,796
Less: Allowance for ECL (1,589,892) (1,564,209)
Carrying amount of finance lease receivables 19,458,453 33,472,587
Present value of minimum finance lease receivables
– Within one year 13,305,964 23,211,519
– In the second year 4,249,047 9,021,983
– In the third year 1,167,355 1,697,408
– In the fourth year 501,794 352,818
– In the fifth year 398,372 256,240
– After five years 1,425,813 496,828
Total 21,048,345 35,036,796
Analysed as:
Current assets 12,355,870 22,202,398
Non-current assets 7,102,583 11,270,189
Total 19,458,453 33,472,587
F-300
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 377
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
26. FINANCE LEASE RECEIVABLES (CONTINUED)
The Group entered into finance lease arrangements with leased assets being machinery equipment
for infrastructure, transportation and logistics, etc. Substantially all finance leases of the Group are
denominated in RMB. The terms of finance leases entered into range from one to ten years.
As at 31 December 2022, the Group’s finance lease receivables pledged as collateral for the Group’s
bank borrowings amounted to RMB426,016 thousand (as at 31 December 2021: RMB1,137,119
thousand).
The floating interest rates of finance lease receivables were with reference to the benchmark interest
rate of the market. The floating interest rates of finance lease receivables were adjusted periodically
with reference to the benchmark interest rate of the market.
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 523,852 496,926 543,431 1,564,209
Changes in the loss allowance:
– ECL (reversed)/recognised (6,717) 342,811 859,139 1,195,233
– Write-offs – – (653,516) (653,516)
– Transfer between stages (77,821) (308,438) 386,259 –
– Recovery of finance lease receivables
previously written off – – 83,099 83,099
– Other derecognition – – (599,133) (599,133)
As at 31 December 2022 439,314 531,299 619,279 1,589,892
F-301
378 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
26. FINANCE LEASE RECEIVABLES (CONTINUED)
Movement of allowance for ECL (Continued)
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 707,113 429,307 381,349 1,517,769
Changes in the loss allowance:
– ECL (reversed)/recognised (127,072) 274,539 915,415 1,062,882
– Write-offs – – (643,965) (643,965)
– Transfer between stages (56,189) (206,920) 263,109 –
– Recovery of finance lease receivables
previously written off – – 72,589 72,589
– Other derecognition – – (445,066) (445,066)
As at 31 December 2021 523,852 496,926 543,431 1,564,209
Analysis of present value of minimum finance lease receivables
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 18,404,093 1,623,102 1,021,150 21,048,345
As at 31 December 2021 32,415,838 1,647,131 973,827 35,036,796
F-302
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 379
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
27. RECEIVABLES ARISING FROM SALE AND LEASEBACK ARRANGEMENTS
The table below illustrates the gross and net amounts of receivables arising from sale and leaseback
arrangements.
2022/12/31 2021/12/31
– Within one year 41,038,253 26,278,930
– In the second year 27,141,407 18,371,251
– In the third year 15,714,479 10,718,660
– In the fourth year 6,709,395 3,873,796
– In the fifth year 3,069,131 1,991,889
– Over fifth year 837,855 158,862
Gross amount of receivables arising from sale and leaseback
arrangements 94,510,520 61,393,388
Less: Interest adjustment (8,775,539) (5,535,329)
Present value of receivables arising from sale and leaseback
arrangements 85,734,981 55,858,059
Less: Allowance for ECL (1,185,029) (770,036)
Carrying amount of receivables arising from sale and leaseback
arrangements 84,549,952 55,088,023
Present value of receivables arising from sale and leaseback
arrangements:
– Within one year 37,226,971 23,910,557
– In the second year 24,655,189 16,714,899
– In the third year 14,237,955 9,751,609
– In the fourth year 6,076,049 3,524,290
– In the fifth year 2,779,039 1,812,175
– Over fifth year 759,778 144,529
Total 85,734,981 55,858,059
Analysed as:
Current assets 36,702,132 23,566,177
Non-current assets 47,847,820 31,521,846
Total 84,549,952 55,088,023
As at 31 December 2022, the Group’s receivables arising from sale and leaseback arrangements pledged
as collateral for the Group’s bank borrowings amounted to RMB5,005,702 thousand (31 December
2021: RMB8,024,083 thousand).
F-303
380 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
27. RECEIVABLES ARISING FROM SALE AND LEASEBACK ARRANGEMENTS
(CONTINUED)
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 699,717 41,974 28,345 770,036
Changes in the loss allowance:
– ECL recognised 290,622 111,416 100,975 503,013
– Write-offs – – (23,738) (23,738)
– Transfer between stages (37,978) 6,325 31,653 –
– Recovery of receivable arising from
sale and leaseback arrangements
previously written off – – 3,591 3,591
– Other derecognition – – (67,873) (67,873)
As at 31 December 2022 952,361 159,715 72,953 1,185,029
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 455,567 11,128 10,489 477,184
Changes in the loss allowance:
– ECL recognised 251,389 31,196 33,024 315,609
– Write-offs – – (17,311) (17,311)
– Transfer between stages (7,239) (350) 7,589 –
– Recovery of receivable arising from
sale and leaseback arrangements
previously written off – – 2,543 2,543
– Other derecognition – – (7,989) (7,989)
As at 31 December 2021 699,717 41,974 28,345 770,036
F-304
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 381
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
27. RECEIVABLES ARISING FROM SALE AND LEASEBACK ARRANGEMENTS
(CONTINUED)
Analysis of present value of receivables arising from sale and leaseback arrangements
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 84,955,975 634,235 144,771 85,734,981
As at 31 December 2021 55,618,393 179,113 60,553 55,858,059
28. EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
2022/12/31 2021/12/31
Managed Account 6,096,319 10,246,871
Analysed as:
– Listed 5,102,310 9,860,664
– Unlisted 994,009 386,207
6,096,319 10,246,871
Notes:
(i) As at 31 December 2022, equity instruments at fair value through other comprehensive income (“FVTOCI”)
include non-traded shares and shares held by the Group. As the equity instruments are not held for trading
purpose, the Group has designated these investments as equity instruments at FVTOCI.
As a result of the change of investment strategies, the Group disposed certain equity instrument at FVTOCI,
and the corresponding losses of RMB300,125 thousand was reclassified from revaluation reserve to retained
earnings.
(ii) As at 31 December 2022, equity instruments at FVTOCI of RMB1,866,595 thousand (31 December 2021:
RMB2,569,298 thousand) were collateralized for securities lending.
The dividend income from equity instrument at FVTOCI was disclosed in Note 8.
F-305
382 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
29. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
2022/12/31 2021/12/31
Unlisted debt securities 23,497,708 10,531,176
Listed debt securities 29,354,191 26,521,769
52,851,899 37,052,945
Analysed for reporting purpose as:
Current assets 6,876,553 4,002,056
Non-current assets 45,975,346 33,050,889
52,851,899 37,052,945
ECL 204,409 259,658
As at 31 December 2022, debt instruments at fair value through other comprehensive income of
RMB35,447 million (31 December 2021: RMB27,051 million) were collateralized for repurchase
arrangements, securities lending, refinancing and derivatives compensation contracts.
Movement of allowance for ECL
Lifetime ECL Lifetime
not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 100,389 159,003 266 259,658
Changes in the loss allowance:
– ECL reversed (57,000) (6,642) (266) (63,908)
– Transfer between stages 34,941 (34,941) – –
– Exchange difference and others 8,659 – – 8,659
As at 31 December 2022 86,989 117,420 – 204,409
F-306
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 383
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
29. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME (CONTINUED)
Movement of allowance for ECL (Continued)
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 45,423 99,441 602,892 747,756
Changes in the loss allowance:
– ECL recognised/(reversed) 66,641 48,462 (31,591) 83,512
– Transfer between stages (11,100) 11,100 – –
– Other derecognition – – (600,550) (600,550)
– Exchange difference and others (575) – 29,515 28,940
As at 31 December 2021 100,389 159,003 266 259,658
Gross carrying amount
Lifetime ECL Lifetime
not credit- ECL (credit-
12m ECL mpaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 48,696,364 4,265,842 – 52,962,206
As at 31 December 2021 33,469,181 3,436,585 38,434 36,944,200
30. DEBT INSTRUMENTS MEASURED AT AMORTISED COST
2022/12/31 2021/12/31
Analysed by type:
Debt instruments 5,825,147 4,745,698
Less: Allowance for ECL (18,990) (20,489)
5,806,157 4,725,209
Analysed for reporting purpose as:
Current assets 369,071 1,099,101
Non-current assets 5,437,086 3,626,108
5,806,157 4,725,209
F-307
384 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
30. DEBT INSTRUMENTS MEASURED AT AMORTISED COST (CONTINUED)
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 20,489 – – 20,489
Changes in the loss allowance:
– ECL reversed (1,915) – – (1,915)
– Exchange difference and others 416 – – 416
As at 31 December 2022 18,990 – – 18,990
Lifetime ECL Lifetime
not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 11,014 – 78,053 89,067
Changes in the loss allowance:
– ECL recognised 10,462 – – 10,462
– Other derecognition – – (74,070) (74,070)
– Exchange difference and others (987) – (3,983) (4,970)
As at 31 December 2021 20,489 – – 20,489
Gross carrying amount:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 5,825,147 – – 5,825,147
As at 31 December 2021 4,745,698 – – 4,745,698
As at 31 December 2022, debt instruments measured at amortised cost of RMB4,004 million were
collateralized for repurchase arrangements and refinancing with Bank of Portugal (31 December 2021,
RMB2,565 million).
F-308
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 385
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
31. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2022/12/31 2021/12/31
Debt securities 101,634,305 117,085,317
Equity securities 30,343,977 34,954,924
Funds 58,853,951 48,625,818
Others 18,766,496 19,743,690
209,598,729 220,409,749
Analysed for reporting purpose as:
Current assets 184,555,352 195,277,554
Non-current assets 25,043,377 25,132,195
209,598,729 220,409,749
Notes:
(i) As at 31 December 2022, financial assets at fair value through profit or loss of RMB63,261 million (31
December 2021: RMB62,710 million) were collateralized for repurchase arrangements, securities lending,
refinancing and derivatives compensation contracts, including restricted securities amounted to RMB487
million (31 December 2021: RMB1,729 million).
(ii) The restricted financial assets at fair value through profit or loss with a legally enforceable restriction that
prevents the Group to dispose of within a specified period amounted to approximately RMB4,257 million
as at 31 December 2022 (31 December 2021: RMB9,045 million). The fair value of these financial assets
has considered the relevant features such including selling restrictions.
(iii) For financial assets in connection with structured products with remaining maturities over one year, they
are classified as non-current assets as they are not expected to be settled within one year.
F-309
386 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS
2022/12/31 2021/12/31
Analysed by collateral type:
Stock (Note) 27,795,962 31,968,603
Bonds 5,413,745 9,584,043
Less: Allowance for ECL (564,558) (1,791,629)
32,645,149 39,761,017
Analysed by market:
Stock Exchange 32,015,828 37,044,102
Inter-bank market 1,193,879 4,508,544
Less: Allowance for ECL (564,558) (1,791,629)
32,645,149 39,761,017
Analysed for reporting purpose as:
Current assets 32,595,078 39,185,614
Non-current assets 50,071 575,403
32,645,149 39,761,017
Note: The financial assets (pledged by stock) held under resale agreements are those resale agreements which
qualified investors entered into with the Group with a commitment to purchasing the specified securities
at a future date with an agreed price. As at 31 December 2022, for the Group, the gross carrying amount
of these agreements within one year was RMB27,745,853 thousand (31 December 2021: RMB31,392,851
thousand), the gross carrying amount of these agreements over one year was RMB50,109 thousand (31
December 2021: RMB575,752 thousand);
As at 31 December 2022, the fair value of the collateral was RMB89,186,204 thousand (31 December 2021:
RMB121,478,644 thousand).
F-310
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 387
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS (CONTINUED)
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 13,905 1,180 1,776,544 1,791,629
Changes in the loss allowance:
– ECL (reversed)/recognised (1,174) 1,353 (954,015) (953,836)
– Transfer between stages 837 (840) 3 –
– Other derecognition – – (273,239) (273,239)
– Exchange difference and others 4 – – 4
As at 31 December 2022 13,572 1,693 549,293 564,558
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 9,693 7,881 1,777,912 1,795,486
Changes in the loss allowance:
– ECL (reversed)/recognised (48) (3,072) 785,076 781,956
– Write-offs – – (646,387) (646,387)
– Transfer between stages 4,266 (3,629) (637) –
– Other derecognition – – (139,420) (139,420)
– Exchange difference and others (6) – – (6)
As at 31 December 2021 13,905 1,180 1,776,544 1,791,629
F-311
388 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
32. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS (CONTINUED)
The following table details the credit risk exposures to financial assets held under resale agreements,
which require an expected credit loss assessment:
Gross carrying amount:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 31,146,703 330,638 1,732,366 33,209,707
As at 31 December 2021 37,068,437 214,814 4,269,395 41,552,646
33. OTHER LOANS AND RECEIVABLES
2022/12/31 2021/12/31
Entrusted loans and others 514,159 720,224
Factoring receivable – 6,030,532
Other loans and receivables 7,055,246 8,926,484
Gross carrying amount 7,569,405 15,677,240
Less: Allowance for ECL (841,237) (738,575)
6,728,168 14,938,665
Analysed for reporting purpose as:
Current assets 4,209,604 12,544,269
Non-current assets 2,518,564 2,394,396
6,728,168 14,938,665
F-312
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 389
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
33. OTHER LOANS AND RECEIVABLES (CONTINUED)
Movement of allowance for ECL
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 130,639 249,589 358,347 738,575
Changes in the loss allowance:
– ECL (reversed)/recognised (103,989) 12,445 434,450 342,906
– Write-offs – – (191,855) (191,855)
– Transfer between stages (2,097) – 2,097 –
– Recovery of other loans and
receivables previously
written off – – 9,044 9,044
– Other derecognition – (101,867) – (101,867)
– Exchange difference and others 2,386 – 42,048 44,434
As at 31 December 2022 26,939 160,167 654,131 841,237
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 161,119 394,663 323,056 878,838
Changes in the loss allowance:
– ECL (reversed)/recognised (4,691) 65,930 451,341 512,580
– Write-offs – – (52,703) (52,703)
– Transfer between stages (24,813) (210,885) 235,698 –
– Recovery of other loans and
receivables previously
written off – – 1,344 1,344
– Other derecognition – – (592,429) (592,429)
– Exchange difference and others (976) (119) (7,960) (9,055)
As at 31 December 2021 130,639 249,589 358,347 738,575
F-313
390 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
33. OTHER LOANS AND RECEIVABLES (CONTINUED)
The following table details the credit risk exposures of other loans and receivables, which are subject
to expected credit loss assessment:
Gross carrying amount:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 2,460,819 378,612 4,729,974 7,569,405
As at 31 December 2021 10,575,552 935,291 4,166,397 15,677,240
34. LOANS AND ADVANCES
2022/12/31 2021/12/31
loans and advances 5,978,815 4,808,748
Less: Allowance for ECL (109,801) (96,097)
5,869,014 4,712,651
Analysed for reporting purpose as:
Current assets 837,281 593,565
Non-current assets 5,031,733 4,119,086
5,869,014 4,712,651
F-314
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 391
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
34. LOANS AND ADVANCES (CONTINUED)
Movement of ECL for loans and advances:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 18,529 37,737 39,831 96,097
Changes in the loss allowance:
– ECL recognised/(reversed) 2,506 (785) 4,878 6,599
– Transfer between stages 664 (664) – –
– Exchange difference and others 1,012 3,965 2,128 7,105
As at 31 December 2022 22,711 40,253 46,837 109,801
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 14,888 59,467 33,089 107,444
Changes in the loss allowance:
– ECL recognised/(reversed) 7,308 (18,205) 12,021 1,124
– Write-offs – – (2,888) (2,888)
– Transfer between stages (2,029) 508 1,521 –
– Exchange difference and others (1,638) (4,033) (3,912) (9,583)
As at 31 December 2021 18,529 37,737 39,831 96,097
F-315
392 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
34. LOANS AND ADVANCES (CONTINUED)
Gross carrying amount:
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 5,153,647 752,825 72,343 5,978,815
As at 31 December 2021 4,116,862 596,883 95,003 4,808,748
35. DEFERRED TAXATION
For the purpose of presentation in the Group’s statements of financial position, certain deferred tax
assets and liabilities have been offset. The following is the analysis of the deferred tax balances for
financial reporting purposes:
2022/12/31 2021/12/31
Deferred tax assets 4,709,952 5,171,925
Deferred tax liabilities (909,459) (1,320,651)
3,800,493 3,851,274
F-316
35. DEFERRED TAXATION (CONTINUED)
The following are the major deferred tax (liabilities) assets recognised and movements thereon:
Debt instrument Equity instrument
Financial assets/ at fair value at fair value
liabilities at fair Derivative Accrued through other through other
value through Accelerated financial but not paid comprehensive comprehensive Impairment Tax losses
profit or loss depreciation instruments expenses income income losses and others Total
As at 1 January 2021 (859,460) (81,608) 54,231 1,324,938 187,026 (180,706) 2,603,868 535,737 3,584,026
(Charge)/credit to profit or loss (346,392) 11,774 32,971 33,044 (135,131) – 619,840 (8,253) 207,853
(Charge)/credit to other comprehensive income – – (4,053) – (86,644) 108,150 – – 17,453
Effects of exchange rate and other change – 1,744 (930) 15,631 6,252 39,969 (7,001) (13,723) 41,942
As at 31 December 2021 (1,205,852) (68,090) 82,219 1,373,613 (28,497) (32,587) 3,216,707 513,761 3,851,274
F-317
Credit/(charge) to profit or loss 165,406 (16,879) 95,753 (310,391) (14,647) – (187,676) (188,189) (456,623)
Credit to other comprehensive income – – 29,780 – 43,913 320,322 – – 394,015
Effects of exchange rate and other change – (1,678) 3,337 3,223 29,554 (100,042) 23,462 53,971 11,827
As at 31 December 2022 (1,040,446) (86,647) 211,089 1,066,445 30,323 187,693 3,052,493 379,543 3,800,493
At the end of the reporting period, no deferred tax liabilities have been recognised in respect of the temporary differences associated with
undistributed earnings of overseas subsidiaries because the Group is in a position to control the timing of the reversal of the temporary
differences and it is probable that such differences will not reverse in the foreseeable future.
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
393
394 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
36. DEPOSITS WITH EXCHANGES
2022/12/31 2021/12/31
Deposits with stock exchanges
– Shanghai Stock Exchange 458,959 1,083,784
– Shenzhen Stock Exchange 234,925 196,785
– National Equities Exchange and Quotations 2,672 3,183
– Stock Exchange of Hong Kong Limited 1,340 1,788
Subtotal 697,896 1,285,540
Deposits with futures and commodity exchanges
– Shanghai Futures Exchange 3,230,204 2,909,388
– Dalian Commodity Exchange 2,580,037 2,241,738
– Zhengzhou Commodity Exchange 1,342,274 1,083,011
– China Financial Futures Exchange 12,743,745 8,715,967
– Shanghai Gold Exchange 63,451 15,694
– HKFE Clearing Corporation Limited 2,250 5,430
– Collateral deposits placed with overseas stock exchange and
brokers 415,849 594,660
Subtotal 20,377,810 15,565,888
Trading rights and other deposits
– Guarantee fund paid to Shanghai Stock Exchange 21,046 40,792
– Guarantee fund paid to Shenzhen Stock Exchange 23,832 49,113
– Deposit with CSFC 1,415,591 440,150
– Deposit with Shanghai Clearing House 131,853 117,659
– Guarantee fund paid to the Stock Exchange of Hong Kong
Options Clearing House Ltd. 3,228 4,241
– Guarantee fund paid to Hong Kong Securities Clearing
Company Ltd. 182,324 142,223
– Others 10,994 9,562
Subtotal 1,788,868 803,740
Total 22,864,574 17,655,168
Analysed for reporting purpose as:
Current assets 22,664,637 17,491,923
Non-current assets 199,937 163,245
22,864,574 17,655,168
F-318
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 395
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
37. BANK BALANCES AND CASH
2022/12/31 2021/12/31
General accounts 56,199,340 51,045,568
Cash held on behalf of clients (Note i) 98,970,479 106,920,251
Less: allowance for impairment losses (7,618) (14,202)
155,162,201 157,951,617
Less: non-current restricted bank deposits (Note ii) (1,769,482) (1,503,454)
153,392,719 156,448,163
Bank balances and cash comprise of cash on hand and deposits which bear interest at the prevailing
market rates.
Notes:
(i) The Group received and held cash deposited by clients in the course of the conduct of the regulated activities.
The Group has recognised the corresponding amount in accounts payable to brokerage clients (Note 50).
The Group did not have a legally enforceable right to offset these payables and clients’ deposits.
(ii) The non-current restricted bank deposits include risk reserves, pledge bank deposits and margin deposits
over one year.
38. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise of the following:
2022/12/31 2021/12/31
Bank balances and cash – general account
(excluding accrued interest) 56,102,251 50,949,331
Less: Restricted bank deposits (i) (2,887,055) (2,534,750)
Deposits with other banks (excluding accrued interest) 179,809 226,311
Deposits with central banks other than legal reserve 3,231,241 3,284,435
Clearing settlement funds – House accounts 10,903,854 5,779,740
67,530,100 57,705,067
(i) The restrictive deposits are special account deposits for risk reserves, margin deposits of notes payable,
aircraft maintenance funds and pledge bank deposits.
F-319
396 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
39. OTHER NON-CURRENT ASSETS
2022/12/31 2021/12/31
Long-term receivables from government cooperation projects 1,174,762 885,385
Foreclosed assets 86,701 250,330
Repossession of finance lease assets 85,385 219,013
Others 1,754,174 536,630
3,101,022 1,891,358
40. ADVANCES TO CUSTOMERS ON MARGIN FINANCING
2022/12/31 2021/12/31
Loans to margin clients (Note) 70,026,612 76,937,089
Less: Allowance for ECL (2,182,741) (1,713,685)
67,843,871 75,223,404
Analysed for reporting purpose as:
Current assets 67,843,871 75,223,404
Note:
The credit facility limits for margin clients are determined by the discounted market value of the collateral securities
accepted by the Group.
The majority of the loans to margin clients, which are secured by the underlying pledged securities, are interest
bearing. The Group maintains a list of approved stocks for margin lending at a specified loan to collateral ratio.
Any excess in the lending ratio will trigger a margin call which the customers have to make up the shortfall.
Loans to margin clients as at 31 December 2022 were secured by the customers’ securities to the Group as collateral
with undiscounted market value of approximately RMB208,287,447 thousand (31 December 2021: RMB263,615,471
thousand).
As at 31 December 2022, cash collateral received from clients for securities lending and margin financing
arrangement, included in the Group’s accounts payable to brokerage clients amounted to approximately
RMB7,634,836 thousand (31 December 2021: RMB8,073,655 thousand).
The directors of the Company are of the opinion that the aging analysis does not give additional value in view of
the nature of the business. As a result, no aging analysis is disclosed. The Group determines the allowance for
impaired debts based on the evaluation of collectability and management’s judgment including the assessment of
change in credit quality, collateral and the past collection history of each client. The concentration of credit risk is
limited due to the customer base being large and unrelated.
F-320
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 397
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
40. ADVANCES TO CUSTOMERS ON MARGIN FINANCING (CONTINUED)
Movements of ECL for advances to customers on margin financing.
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2022 55,087 11,811 1,646,787 1,713,685
Changes in the loss allowance:
– ECL recognised 923 26,682 411,439 439,044
– Write-offs – – (39,802) (39,802)
– Transfer between stages (5,670) (8,077) 13,747 –
– Exchange difference and others 1,781 1,568 66,465 69,814
As at 31 December 2022 52,121 31,984 2,098,636 2,182,741
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 1 January 2021 32,760 5,838 2,046,415 2,085,013
Changes in the loss allowance:
– ECL recognised 26,787 2,181 456,294 485,262
– Write-offs – – (832,743) (832,743)
– Transfer between stages (3,830) 3,946 (116) –
– Exchange difference and others (630) (154) (23,063) (23,847)
As at 31 December 2021 55,087 11,811 1,646,787 1,713,685
F-321
398 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
40. ADVANCES TO CUSTOMERS ON MARGIN FINANCING (CONTINUED)
Gross carrying amount
Lifetime ECL Lifetime
(not credit- ECL (credit-
12m ECL impaired) impaired)
Stage 1 Stage 2 Stage 3 Total
As at 31 December 2022 60,787,569 2,212,707 7,026,336 70,026,612
As at 31 December 2021 73,158,320 1,019,080 2,759,689 76,937,089
41. ACCOUNTS RECEIVABLE
2022/12/31 2021/12/31
Accounts receivable from:
– Brokers, dealers and clearing house 4,509,006 7,007,206
– Cash clients 3,508,600 1,503,403
– Asset and fund management 560,359 847,026
– Advisory and financial planning 151,312 28,354
– Clients for subscription of new shares in IPO 965 –
– Others 1,986,304 2,189,133
10,716,546 11,575,122
Less: Allowance for ECL (322,031) (203,106)
10,394,515 11,372,016
F-322
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 399
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
41. ACCOUNTS RECEIVABLE (CONTINUED)
Aging analysis of accounts receivable from the trade date is as follows:
2022/12/31 2021/12/31
Less than 3 months 8,872,138 9,918,027
4 to 6 months 704,621 490,884
7 to 12 months 369,720 432,920
More than 1 year 448,036 530,185
10,394,515 11,372,016
42. DERIVATIVE INSTRUMENTS
2022/12/31
Contractual
value Assets Liabilities
Derivatives designated in hedge accounting:
Interest rate swaps 2,437,841 87,005 18,745
Foreign exchange swap 1,256,077 6,363 16,800
Forward contracts 1,443,475 19,988 40,626
Derivatives held for trading:
Stock index futures contracts (Note i) 28,451,306 – –
Treasury futures contracts (Note ii) 21,995,571 – –
Commodity futures contracts (Note iii) 13,735,363 – –
Interest rate swap contracts (Note iv) 139,385,340 331,091 296,080
Equity swap 22,043,716 590,554 314,327
Forward contracts 22,680,325 46,007 71,642
Options (Note v) 85,370,924 387,993 127,716
Embedded equity instruments 1,110,869 – 7,986
Foreign exchange swap 8,875,332 8,166 4,133
Credit default swap 152,000 – 364
Total 348,938,139 1,477,167 898,419
F-323
400 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
42. DERIVATIVE INSTRUMENTS (CONTINUED)
2021/12/31
Contractual
value Assets Liabilities
Derivatives designated in hedge accounting:
Interest rate swaps 2,594,286 11,079 67,973
Foreign exchange swap 2,080,552 – 88,985
Forward contracts 820,273 – 74,157
Derivatives held for trading:
Stock index futures contracts (Note i) 15,488,680 – –
Treasury futures contracts (Note ii) 22,279,016 – –
Commodity futures contracts (Note iii) 11,394,851 – –
Interest rate swap contracts (Note iv) 62,486,693 453,337 382,558
Equity swap 6,551,915 208,790 292,057
Forward contracts 18,835,143 167,665 102,935
Options (Note v) 127,949,347 192,765 325,999
Embedded equity instruments 2,860,711 – 186,354
Foreign exchange swap 2,137,298 51,095 25,093
Credit default swap 422,000 – 2,205
Total 275,900,765 1,084,731 1,548,316
F-324
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 401
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
42. DERIVATIVE INSTRUMENTS (CONTINUED)
Notes:
(i) Stock index futures contracts
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in
stock index futures (“SIF”) were settled daily and the corresponding payments or receipts were included in
“clearing settlement funds” as at 31 December 2022 and 31 December 2021. Accordingly, the net position
of the SIF contracts in derivative instruments was nil at the end of reporting period. As at 31 December
2022, the contract value of the outstanding stock index futures contracts that the Group held for the
market risk of the securities lent or to be lent to clients is RMB28,451,306 thousand (31 December 2021:
RMB15,488,680 thousand), recognising net derivative liabilities of RMB572,114 thousand (31 December
2021: net derivative assets of RMB167,825 thousand) before settlement.
(ii) Treasury futures contracts
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in
treasury futures (“TF”) contracts were settled daily and the corresponding payments or receipts were included
in “clearing settlement funds” as at 31 December 2022 and 31 December 2021. Accordingly, the net position
of the TF contracts in derivative instruments was nil at the end of reporting period (31 December 2021: nil).
2022/12/31
Contractual
value Fair value
T2303 520,168 (499)
TF2303 9,603,257 (22,545)
TS2303 11,872,146 (23,637)
Total 21,995,571 (46,681)
Plus: settlements 46,681
Net position of TF contracts –
2021/12/31
Contractual
value Fair value
T2203 2,808,181 (30,324)
TF2203 8,386,402 (62,172)
TS2203 11,084,433 (23,127)
Total 22,279,016 (115,623)
Plus: settlements 115,623
Net position of TF contracts –
F-325
402 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
42. DERIVATIVE INSTRUMENTS (CONTINUED)
Notes: (continued)
(iii) Commodity futures contracts
Under the daily mark-to-market and settlement arrangement, any gains or losses of the Group’s position in
commodity futures were settled daily and the corresponding payments or receipts were included in “clearing
settlement funds”. As at 31 December 2022, the net position of the commodity futures contracts under the
daily mark-to-market and settlement arrangement was nil (31 December 2021: nil).
2022/12/31 2021/12/31
Contractual Contractual
value Fair value value Fair value
Total 13,735,363 (5,874) 11,394,851 (13,426)
Plus: settlement 5,874 13,426
Net position – –
(iv) Interest rate swap contracts
Under the daily mark-to-market and settlement arrangements, any gains or losses of the Group’s position
in interest rate swap (“IRS”) contracts were settled daily in Shanghai Clearing House and the corresponding
payments or receipts were included in “clearing settlement funds” as at 31 December 2022. Accordingly,
the net position of the IRS contracts in derivative instruments was nil at the end of reporting period.
For IRS contracts in mainland China and Hong Kong market not under the daily mark-to-market and
settlement arrangement are presented gross at the end of reporting period.
2022/12/31
Contractual
value Assets Liabilities
IRS – settled in Shanghai Clearing House 83,500,000 234,892 188,180
IRS – non-centralised settlement 55,885,340 331,091 296,080
Total 139,385,340 565,983 484,260
Plus: settlements (234,892) (188,180)
Net position of IRS contracts 331,091 296,080
F-326
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 403
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
42. DERIVATIVE INSTRUMENTS (CONTINUED)
Notes: (continued)
(iv) Interest rate swap contracts (Continued)
2021/12/31
Contractual
value Assets Liabilities
IRS – settled in Shanghai Clearing House 62,456,693 73,513 382,558
IRS – non-centralised settlement 30,000 453,337 –
Total 62,486,693 526,850 382,558
Plus: settlements (73,513) –
Net position of IRS contracts 453,337 382,558
(v) Options
At 31 December 2022, the notional principal amounts of the Group’s options purchased or written in
Mainland China were approximately RMB75,370,059 thousand (31 December 2021: RMB120,134,799
thousand). The notional principal amounts of the Group’s listed options purchased or written outside
Mainland China were approximately RMB10,000,865 thousand (31 December 2021: RMB7,814,548
thousand).
43. OTHER CURRENT ASSETS
2022/12/31 2021/12/31
Prepayments 1,349,583 1,458,367
Inventories 104,379 166,906
Dividend receivable 618 3,042
Other receivables (Note i) 5,853,376 5,109,234
7,307,956 6,737,549
Less: Allowance for ECL (Note ii) (559,333) (495,462)
6,748,623 6,242,087
Notes:
(i) The other receivables and prepayments include short-term rental deposits placed with landlords under
operating leases, other prepaid expenses for daily operation and other receivable and prepayments items
such as prepaid taxes.
(ii) Included in the impairment losses of the Group mainly represents a gross receivable of RMB429,994 thousand
from an independent third party. In the opinion of the directors of the Company, the recoverability of the
receivable is remote and a full provision was made in prior year.
F-327
404 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
44. PLACEMENTS TO BANKS AND OTHER FINANCIAL INSTITUTIONS
2022/12/31 2021/12/31
Placements to overseas banks 274,590 359,538
Less: Allowance for ECL (145) (6,610)
274,445 352,928
45. CLEARING SETTLEMENT FUNDS
2022/12/31 2021/12/31
Clearing settlement funds held with clearing houses for:
House accounts 10,903,854 5,779,740
Customers 10,476,841 10,985,678
21,380,695 16,765,418
These clearing settlement funds are held by the clearing houses for the Group and can be withdrawn
by the Group at will. These balances carry interest at prevailing market interest rates.
46. DEPOSITS WITH CENTRAL BANKS AND OTHER BANKS
2022/12/31 2021/12/31
Deposits with central banks other than legal reserve 3,231,599 3,284,435
Legal reserve 13,497 19,774
3,245,096 3,304,209
Deposits with other banks 179,840 226,343
Less: Allowance for ECL (6,968) (6)
172,872 226,337
Total 3,417,968 3,530,546
Deposits with central banks other than legal reserve is repayable on demand. Legal reserve deposits
are non-interesting bearing.
F-328
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 405
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
47. BORROWINGS
2022/12/31 2021/12/31
Short-term borrowings:
Secured borrowings (Note) 291,097 1,906,267
Unsecured borrowings 34,566,945 27,668,766
34,858,042 29,575,033
Long-term borrowing:
Secured borrowings (Note) 18,399,853 17,576,036
Unsecured borrowings 37,558,350 32,002,992
55,958,203 49,579,028
Total 90,816,245 79,154,061
Current liabilities:
Short-term borrowings 34,858,042 29,575,033
Long-term borrowings due within one year 22,006,870 18,827,302
56,864,912 48,402,335
Non-current liabilities:
Long-term borrowings 33,951,333 30,751,726
90,816,245 79,154,061
Analysis by maturity:
Less than 1 year 56,864,912 48,402,335
1 to 2 years 11,911,122 10,633,261
2 to 5 years 21,147,505 19,987,997
More than 5 years 892,706 130,468
90,816,245 79,154,061
F-329
406 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
47. BORROWINGS (CONTINUED)
Note:
As at 31 December 2022, borrowings of RMB10,372 million (31 December 2021: RMB6,756 million) are secured
by the shares of Haitong UT Capital Group Co., Limited and Haitong Bank, S.A. held by the Company.
As at 31 December 2022, bank loans of HKD185 million (RMB165 million) (31 December 2021: HKD78 million
(RMB64 million)) were secured by collaterals (listed shares) acquired against the advances to customers on margin
financing with the consent of the customers. The fair value of the secured collaterals is HKD1,979 million (RMB1,768
million) (31 December 2021: HKD2,437 million (RMB1,992 million)).
As at 31 December 2022, borrowings of RMB8,154 million (31 December 2021: RMB9,741 million) are secured
by finance leases receivables, receivables arising from sale and leaseback arrangements, the shares of subsidiaries,
and aircraft for leasing. As at 31 December 2022, the book value of secured finance lease receivable is RMB426
million (31 December 2021: RMB1,137 million), the book value of receivables arising from sale and leaseback
arrangements is RMB5,006 million (31 December 2021: RMB8,024 million), the book value of secured aircraft for
leasing is RMB4,832 million (31 December 2021: RMB4,608 million).
48. SHORT-TERM FINANCING BILLS PAYABLES
2022/12/31 2021/12/31
Ultra-short-term bonds 5,035,289 6,076,732
Medium-term notes 2,909,046 5,593,378
Short-term income certification 2,647,746 2,178,256
Short-term bonds 1,003,520 –
Short-term corporate bonds 4,563,493 11,138,322
16,159,094 24,986,688
F-330
48. SHORT-TERM FINANCING BILLS PAYABLES (CONTINUED)
Issue Entity Type Currency Issue date Maturity date Coupon Rate Opening Increase Decrease Ending
Balance Balance
Haitong Securities Co., Ltd Short-term corporate bonds RMB 12/07/2021 16/06/2022 2.82% 6,080,196 76,950 6,157,146 –
Haitong Securities Co., Ltd Short-term corporate bonds RMB 29/07/2021 29/07/2022 2.72% 5,058,126 77,874 5,136,000 –
Haitong Securities Co., Ltd Short-term corporate bonds RMB 09/06/2022 09/06/2023 2.50% – 4,563,493 – 4,563,493
Haitong Securities Co., Ltd Short-term income RMB 04/01/2022 to 01/01/2023 to 0.00%-3.08% 2,178,256 15,606,162 15,136,672 2,647,746
certification 30/12/2022 01/01/2024
Haitong Unitrust International Financial Ultra-short-term bonds RMB 30/04/2021 21/01/2022 3.35% 1,022,452 1,835 1,024,287 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 21/05/2021 21/01/2022 3.25% 1,019,896 1,780 1,021,676 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 24/05/2021 18/02/2022 3.30% 509,908 2,170 512,078 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 06/08/2021 22/04/2022 2.97% 1,011,492 9,032 1,020,524 –
Leasing Co., Ltd
F-331
Haitong Unitrust International Financial Ultra-short-term bonds RMB 23/08/2021 11/03/2022 2.83% 504,893 2,675 507,568 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 13/10/2021 25/03/2022 2.85% 1,005,768 6,481 1,012,249 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 25/11/2021 15/04/2022 2.85% 1,002,324 8,120 1,010,444 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 11/01/2022 27/05/2022 2.60% – 1,009,688 1,009,688 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 19/01/2022 17/06/2022 2.60% – 505,307 505,307 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 16/02/2022 26/08/2022 2.43% – 506,358 506,358 –
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
407
408
48. SHORT-TERM FINANCING BILLS PAYABLES (CONTINUED)
Issue Entity Type Currency Issue date Maturity date Coupon Rate Opening Increase Decrease Ending
Balance Balance
Haitong Unitrust International Financial Ultra-short-term bonds RMB 08/03/2022 25/08/2022 2.46% – 505,729 505,729 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 23/03/2022 12/08/2022 2.46% – 1,009,570 1,009,570 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 13/04/2022 28/10/2022 2.49% – 506,754 506,754 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 20/04/2022 18/11/2022 2.28% – 1,013,243 1,013,243 –
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 25/05/2022 17/02/2023 2.05% – 1,012,129 – 1,012,129
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 15/06/2022 10/03/2023 2.06% – 505,443 – 505,443
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
F-332
Haitong Unitrust International Financial Ultra-short-term bonds RMB 09/08/2022 21/04/2023 2.03% – 1,007,493 – 1,007,493
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 23/08/2022 28/04/2023 1.86% – 1,006,090 – 1,006,090
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 26/10/2022 10/03/2023 1.86% – 501,435 – 501,435
Leasing Co., Ltd
Haitong Unitrust International Financial Short-term Corporate bonds RMB 25/10/2022 25/10/2023 2.45% – 1,003,520 – 1,003,520
Leasing Co., Ltd
Haitong Unitrust International Financial Ultra-short-term bonds RMB 16/11/2022 11/08/2023 2.51% – 1,002,700 – 1,002,700
Leasing Co., Ltd
Haitong International Securities Group Ltd Medium-term notes USD 08/04/2021 10/01/2022 0.72% 320,486 29,663 350,149 –
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
Haitong International Securities Group Ltd Medium-term notes HKD 16/07/2021 18/01/2022 0.60% 655,867 60,702 716,569 –
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
48. SHORT-TERM FINANCING BILLS PAYABLES (CONTINUED)
Issue Entity Type Currency Issue date Maturity date Coupon Rate Opening Increase Decrease Ending
Balance Balance
Haitong International Securities Group Ltd Medium-term notes HKD 16/07/2021 15/07/2022 0.70% 207,420 19,197 226,617 –
Haitong International Securities Group Ltd Medium-term notes HKD 29/07/2021 28/01/2022 0.60% 311,477 28,828 340,305 –
Haitong International Securities Group Ltd Medium-term notes HKD 03/08/2021 07/02/2022 0.60% 311,454 28,826 340,280 –
Haitong International Securities Group Ltd Medium-term notes HKD 18/08/2021 18/02/2022 0.50% 655,193 60,639 715,832 –
Haitong International Securities Group Ltd Medium-term notes USD 26/08/2021 25/08/2022 0.58% 319,295 29,551 348,846 –
Haitong International Securities Group Ltd Medium-term notes HKD 14/09/2021 14/03/2022 0.00% 246,644 22,827 269,471 –
Haitong International Securities Group Ltd Medium-term notes USD 20/09/2021 20/09/2022 0.59% 638,366 59,081 697,447 –
Haitong International Securities Group Ltd Medium-term notes USD 08/12/2021 07/12/2022 0.75% 636,686 58,926 695,612 –
Haitong International Securities Group Ltd Medium-term notes HKD 13/12/2021 13/06/2022 0.65% 653,938 60,523 714,461 –
Haitong International Securities Group Ltd Medium-term notes USD 16/12/2021 15/12/2022 0.75% 636,551 58,914 695,465 –
Haitong International Securities Group Ltd Medium-term notes USD 13/01/2022 13/07/2022 0.75% – 419,455 419,455 –
Haitong International Securities Group Ltd Medium-term notes USD 31/01/2022 01/08/2022 0.60% – 139,715 139,715 –
Haitong International Securities Group Ltd Medium-term notes HKD 17/02/2022 16/02/2023 1.00% – 923,319 – 923,319
F-333
Haitong International Securities Group Ltd Medium-term notes HKD 07/03/2022 07/06/2022 0.75% – 805,463 805,463 –
Haitong International Securities Group Ltd Medium-term notes HKD 08/06/2022 09/01/2023 2.10% – 1,536,733 – 1,536,733
Haitong International Securities Group Ltd Medium-term notes HKD 09/06/2022 10/01/2023 2.00% – 90,338 – 90,338
Haitong International Securities Group Ltd Medium-term notes USD 26/08/2022 24/08/2023 4.10% – 358,655 – 358,655
Total 24,986,688 36,243,386 45,070,980 16,159,094
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
409
410
49. BONDS PAYABLE
Principal a
mount in
original Maturity Coupon Opening Closing
Issue entity Type Currency currency Issue date date Rate Balance Increase Decrease Balance
Haitong Securities Co., Ltd Corporate bonds RMB 2,390,000 25/11/2013 25/11/2023 6.18% 2,401,346 153,661 152,211 2,402,796
Haitong Securities Co., Ltd Corporate bonds RMB 800,000 14/07/2014 14/07/2024 5.85% 821,925 48,078 48,309 821,694
Haitong Securities Co., Ltd Corporate bonds RMB 1,000,000 11/08/2017 11/08/2022 4.80% 1,018,551 29,449 1,048,000 –
Haitong Securities Co., Ltd Corporate bonds RMB 5,500,000 22/09/2017 22/09/2027 4.99% 5,569,377 280,940 284,827 5,565,490
Haitong Securities Co., Ltd Corporate bonds USD 300,000 13/12/2018 13/12/2023 4.50% 1,913,075 372,213 194,287 2,091,001
Euribor+
Haitong Securities Co., Ltd Corporate bonds EUR 230,000 13/12/2018 13/12/2023 165bps 1,661,502 227,129 183,882 1,704,749
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 11/04/2019 11/04/2022 3.75% 5,136,130 51,370 5,187,500 –
Haitong Securities Co., Ltd Corporate bonds RMB 4,500,000 15/11/2019 15/11/2022 3.52% 4,520,397 138,003 4,658,400 –
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 27/02/2020 27/02/2023 3.01% 5,126,997 159,435 159,934 5,126,498
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
F-334
Haitong Securities Co., Ltd Corporate bonds RMB 3,500,000 19/03/2020 19/03/2023 2.99% 3,582,573 110,784 111,254 3,582,103
Haitong Securities Co., Ltd Corporate bonds RMB 5,600,000 30/04/2020 30/04/2023 2.38% 5,689,827 142,689 143,846 5,688,670
Haitong Securities Co., Ltd Corporate bonds RMB 700,000 30/04/2020 30/04/2025 2.88% 713,587 20,866 21,481 712,972
Haitong Securities Co., Ltd Corporate bonds RMB 6,700,000 25/05/2020 25/05/2023 2.70% 6,809,531 191,869 193,541 6,807,859
Haitong Securities Co., Ltd Corporate bonds RMB 6,000,000 11/08/2020 11/08/2023 3.53% 6,082,979 220,817 223,120 6,080,676
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 21/10/2020 21/10/2022 3.82% 5,037,677 153,323 5,191,000 –
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 19/11/2020 13/01/2022 3.70% 5,206,795 6,080 5,212,875 –
Haitong Securities Co., Ltd Corporate bonds RMB 6,000,000 13/01/2021 13/01/2024 3.58% 6,207,738 222,216 226,120 6,203,834
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal a
mount in
original Maturity Coupon Opening Closing
Issue entity Type Currency currency Issue date date Rate Balance Increase Decrease Balance
Haitong Securities Co., Ltd Corporate bonds RMB 5,400,000 08/02/2021 08/02/2024 3.79% 5,583,353 211,093 214,849 5,579,597
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 23/04/2021 23/04/2024 3.45% 5,119,568 177,815 181,934 5,115,449
Haitong Securities Co., Ltd Corporate bonds RMB 2,800,000 27/05/2021 27/05/2024 3.35% 2,856,280 96,612 99,083 2,853,809
Haitong Securities Co., Ltd Corporate bonds RMB 2,100,000 10/06/2021 10/06/2024 3.40% 2,140,101 73,459 75,362 2,138,198
Haitong Securities Co., Ltd Corporate bonds RMB 2,000,000 29/07/2021 29/07/2024 3.14% 2,026,841 64,592 66,574 2,024,859
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 20/08/2021 20/08/2024 3.04% 3,033,482 93,775 96,861 3,030,396
Haitong Securities Co., Ltd Corporate bonds RMB 2,000,000 30/08/2021 30/08/2024 3.10% 2,021,063 63,682 65,773 2,018,972
Haitong Securities Co., Ltd Corporate bonds RMB 2,000,000 30/08/2021 30/08/2026 3.43% 2,023,305 69,610 72,373 2,020,542
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 10/11/2021 10/11/2024 3.10% 5,022,082 158,586 164,434 5,016,234
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 22/11/2021 22/11/2024 3.09% 5,016,932 157,983 163,935 5,010,980
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 20/01/2022 25/12/2024 2.84% – 5,137,656 9,434 5,128,222
F-335
Haitong Securities Co., Ltd Corporate bonds RMB 2,900,000 21/02/2022 21/02/2025 2.90% – 2,973,915 5,471 2,968,444
Haitong Securities Co., Ltd Corporate bonds RMB 500,000 07/03/2022 07/03/2025 3.03% – 512,710 943 511,767
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
411
412
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Maturity Coupon Opening Closing
Issue entity Type Currency currency Issue date date Rate Balance Increase Decrease Balance
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 26/07/2022 26/07/2025 2.75% – 5,061,265 9,434 5,051,831
Haitong Securities Co., Ltd Corporate bonds RMB 5,000,000 09/09/2022 09/09/2025 2.53% – 5,040,490 9,434 5,031,056
Haitong Securities Co., Ltd Corporate bonds RMB 4,700,000 14/10/2022 14/10/2025 2.60% – 4,727,087 8,868 4,718,219
Haitong Securities Co., Ltd Corporate bonds RMB 3,000,000 10/11/2022 10/11/2025 2.61% – 3,011,423 5,660 3,005,763
Haitong Securities Co., Ltd Corporate bonds RMB 2,700,000 13/12/2022 20/12/2023 2.90% – 2,704,335 5,094 2,699,241
Haitong Securities Co., Ltd Subordinated notes RMB 3,300,000 28/02/2019 28/02/2022 4.09% 3,413,523 21,447 3,434,970 –
Haitong Securities Co., Ltd Subordinated notes RMB 5,000,000 12/01/2022 12/01/2025 3.18% – 5,157,253 9,434 5,147,819
Haitong Securities Co., Ltd Subordinated notes RMB 2,000,000 25/02/2022 25/02/2025 3.15% – 2,054,573 3,773 2,050,800
Haitong Securities Co., Ltd Subordinated notes RMB 2,480,000 09/03/2022 09/03/2025 3.29% – 2,547,886 4,679 2,543,207
Haitong Securities Co., Ltd Financial bond RMB 7,000,000 29/08/2019 29/08/2022 3.39% 7,081,267 156,033 7,237,300 –
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
F-336
Haitong Securities Co., Ltd Long-term income RMB 588,640 04/01/2021 to 01/01/2023 to 0.00%- 395,855 979,545 779,613 595,787
certificates 30/12/2022 30/12/2024 3.70%
Shanghai Haitong Securities Corporate bonds RMB 1,000,000 04/11/2020 04/11/2025 3.85% 1,006,012 38,500 38,500 1,006,012
Asset management Co., Ltd
Shanghai Haitong Securities Subordinated notes RMB 1,000,000 04/04/2018 04/04/2023 5.00% 103,726 5,000 5,000 103,726
Asset management Co., Ltd
Haitong Unitrust International Corporate bonds RMB 500,000 28/02/2019 28/02/2022 5.20% 521,679 4,132 525,811 –
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 500,000 24/07/2019 24/07/2022 4.83% 510,204 13,350 523,554 –
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 11/05/2020 11/05/2023 3.50% 1,019,973 35,000 33,206 1,021,767
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 700,000 19/06/2020 19/06/2022 3.95% 713,762 12,802 726,564 –
Financial Leasing Co., Ltd
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Maturity Coupon Opening Closing
Issue entity Type Currency currency Issue date date Rate Balance Increase Decrease Balance
Haitong Unitrust International Corporate bonds RMB 1,200,000 28/07/2020 28/07/2023 4.00% 1,216,709 48,000 45,544 1,219,165
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 10/09/2020 10/09/2022 4.40% 1,011,399 30,378 1,041,777 –
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 17/09/2020 17/09/2023 4.20% 1,008,703 42,000 40,036 1,010,667
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 800,000 30/10/2020 30/10/2023 4.15% 802,798 33,200 31,629 804,369
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 26/04/2021 26/04/2025 4.10% 1,024,573 41,000 38,387 1,027,186
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 800,000 18/06/2021 18/06/2025 3.85% 812,964 30,800 28,066 815,698
F-337
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 600,000 12/08/2021 12/08/2024 3.90% 606,340 23,400 22,373 607,367
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 25/10/2021 25/10/2023 3.80% 1,001,517 38,000 34,422 1,005,095
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 24/12/2021 24/12/2024 3.70% 995,925 37,000 34,974 997,951
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,500,000 21/04/2022 21/04/2024 3.48% – 1,531,627 – 1,531,627
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 500,000 05/05/2022 05/05/2025 3.57% – 509,827 – 509,827
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 1,000,000 21/06/2022 21/06/2024 3.16% – 1,013,123 – 1,013,123
Financial Leasing Co., Ltd
Haitong Unitrust International Corporate bonds RMB 600,000 07/07/2022 07/07/2025 3.44% – 607,330 – 607,330
Financial Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
413
414
49. BONDS PAYABLE (CONTINUED)
Principal
amount in
original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
Haitong Unitrust International Financial Corporate bonds RMB 1,000,000 21/10/2022 21/10/2025 3.13% – 1,001,299 – 1,001,299
Leasing Co., Ltd
Haitong Unitrust International Financial Medium-term notes RMB 500,000 31/08/2020 31/08/2023 4.20% 505,673 21,000 20,148 506,525
Leasing Co., Ltd
Haitong Unitrust International Financial Medium-term notes RMB 1,000,000 06/11/2020 06/11/2022 3.97% 1,004,602 33,609 1,038,211 –
Leasing Co., Ltd
Haitong Unitrust International Financial Medium-term notes RMB 500,000 20/01/2021 20/01/2023 4.00% 518,052 20,000 19,162 518,890
Leasing Co., Ltd
Haitong Unitrust International Financial Medium-term notes RMB 1,000,000 09/12/2021 09/12/2024 3.70% 997,363 37,000 35,289 999,074
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
F-338
Haitong Unitrust International Financial Medium-term notes RMB 800,000 13/01/2022 13/01/2025 3.64% – 825,379 – 825,379
Leasing Co., Ltd
Haitong Unitrust International Financial Medium-term notes RMB 1,000,000 27/05/2022 27/05/2025 3.42% – 1,016,579 – 1,016,579
Leasing Co., Ltd
Haitong Unitrust International Financial Medium-term notes RMB 1,200,000 10/08/2022 10/08/2025 3.25% – 1,210,215 – 1,210,215
Leasing Co., Ltd
Haitong Unitrust International Financial Medium-term notes RMB 1,000,000 14/12/2022 14/12/2025 4.13% – 998,271 – 998,271
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 950,000 11/11/2019 19/03/2022 4.57% 22 – 22 –
Leasing Co., Ltd
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount in
original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
Haitong Unitrust International Financial Asset-based notes RMB 950,000 25/03/2020 19/11/2022 4.10% 118,445 1,484 119,929 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 950,000 16/08/2021 26/12/2022 3.40% 4.00% 367,063 5,920 372,983 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 950,000 18/08/2021 26/08/2022 3.50% 339,796 3,914 343,710 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 970,000 18/11/2021 17/05/2022 3.25% 972,226 11,746 983,972 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 950,000 29/11/2021 26/05/2023 3.95% 947,283 22,712 783,668 186,327
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 950,000 10/03/2022 26/08/2024 3.30% 3.50% – 968,051 514,985 453,066
F-339
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 855,000 22/07/2022 18/01/2023 2.30% – 863,411 – 863,411
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based notes RMB 950,000 21/09/2022 20/03/2023 2.10% – 954,137 – 954,137
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 1,440,000 14/06/2019 24/02/2022 4.50% 109 – 109 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 926,000 24/12/2019 26/05/2022 4.60% 62,770 650 63,420 –
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
415
416
49. BONDS PAYABLE (CONTINUED)
Principal
amount in
original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
Haitong Unitrust International Financial Asset-based special plan RMB 190,000 07/04/2020 13/02/2023 5.00% 190,498 9,500 8,891 191,107
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 15/04/2020 26/08/2022 3.40% 131,229 1,455 132,684 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 880,000 28/05/2020 26/07/2022 3.40% 203,538 1,820 205,358 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 17/06/2020 28/11/2022 3.70% 248,767 3,880 252,647 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 19/06/2020 26/01/2022 3.80% 26,979 70 27,049 –
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
F-340
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 28/07/2020 28/11/2022 4.10% 280,675 4,889 285,564 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 14/08/2020 26/04/2022 3.68% 3.99% 153,060 628 153,688 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 09/09/2020 26/10/2022 4.00% 4.20% 320,240 4,604 324,844 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 22/10/2020 26/06/2023 4.30% 311,193 6,887 311,050 7,030
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 24/11/2020 26/04/2022 4.15% 4.30% 240,693 1,881 242,574 –
Leasing Co., Ltd
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount in
original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 09/12/2020 26/07/2023 4.30% 419,463 7,766 386,625 40,604
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 02/02/2021 28/08/2023 4.55% 432,615 9,187 397,003 44,799
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 25/03/2021 28/08/2023 4.50% 501,058 11,085 462,756 49,387
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 31/03/2021 28/11/2022 4.00% 4.40% 388,691 6,326 395,017 –
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 29/04/2021 26/09/2023 4.00% 4.50% 515,133 13,651 440,619 88,165
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 31/05/2021 26/01/2023 4.35% 610,326 11,114 582,109 39,331
F-341
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 17/06/2021 28/08/2023 3.80% 4.40% 587,188 12,496 515,165 84,519
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 05/08/2021 26/09/2023 3.50% 4.20% 594,324 13,506 494,043 113,787
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 24/09/2021 26/04/2023 3.83% 3.99% 954,384 14,118 829,417 139,085
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 19/11/2021 28/08/2023 3.80% 3.95% 947,632 22,827 738,726 231,733
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 08/12/2021 28/08/2023 3.78% 4.00% 944,485 17,869 782,650 179,704
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
417
418
49. BONDS PAYABLE (CONTINUED)
Principal
amount in
original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 26/01/2022 26/05/2023 3.30% 3.40% – 969,923 829,057 140,866
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 935,000 28/04/2022 17/06/2024 3.20%-4.40% – 978,234 514,573 463,661
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 29/06/2022 26/02/2025 2.69%-3.60% – 959,335 260,429 698,906
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 943,000 07/07/2022 16/12/2024 3.10%-4.30% – 975,505 325,390 650,115
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 1,425,000 16/09/2022 25/12/2025 4.10% – 1,411,785 16,166 1,395,619
Leasing Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
F-342
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 21/09/2022 26/08/2025 2.25%-3.40% – 950,033 132,339 817,694
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 984,000 28/10/2022 17/02/2025 3.03%-4.00% – 1,007,144 – 1,007,144
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 1,425,000 23/12/2022 25/12/2025 4.48% – 1,401,010 – 1,401,010
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 950,000 23/12/2022 22/11/2023 4.30% – 630,297 – 630,297
Leasing Co., Ltd
Haitong Unitrust International Financial Private publication notes RMB 300,000 23/04/2019 23/04/2022 4.65% 309,506 4,281 313,787 –
Leasing Co., Ltd
Haitong Unitrust International Financial Private publication notes RMB 1,000,000 31/05/2019 31/05/2022 4.70% 1,027,051 19,315 1,046,366 –
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
Leasing Co., Ltd
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
49. BONDS PAYABLE (CONTINUED)
Principal
amount in
original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
Haitong Unitrust International Financial Private publication notes RMB 1,400,000 04/12/2019 04/12/2022 4.50% 1,402,664 58,167 1,460,831 –
Leasing Co., Ltd
Haitong Unitrust International Financial Private publication notes RMB 1,000,000 04/06/2021 04/06/2023 3.95% 1,020,318 39,500 37,817 1,022,001
Leasing Co., Ltd
Haitong Unitrust International Financial Private publication notes RMB 1,000,000 11/11/2021 11/11/2024 4.19% 1,001,267 41,900 40,274 1,002,893
Leasing Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 760,000 29/12/2021 15/08/2023 3.80% 3.95% 754,450 17,587 536,504 235,533
Leasing Co., Ltd/Haitong UT MSE
Financial Leasing (Shanghai) Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 1,140,000 13/04/2022 26/12/2023 3.24% 3.40% – 1,155,326 736,992 418,334
Leasing Co., Ltd/Haitong UT MSE
F-343
Financial Leasing (Shanghai) Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 1,140,000 18/05/2022 26/03/2024 2.69%-3.20% – 1,154,190 587,050 567,140
Leasing Co., Ltd/Haitong UT MSE
Financial Leasing (Shanghai) Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 1,140,000 12/07/2022 27/05/2024 2.60%-3.03% – 1,150,007 359,336 790,671
Leasing Co., Ltd/Haitong UT MSE
Financial Leasing (Shanghai) Co., Ltd
Haitong Unitrust International Financial Asset-based special plan RMB 1,140,000 08/09/2022 26/08/2024 2.30%-2.80% – 1,142,771 184,453 958,318
Leasing Co., Ltd/Haitong UT MSE
Financial Leasing (Shanghai) Co., Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
419
420
49. BONDS PAYABLE (CONTINUED)
Principal
amount
in original Opening Closing
Issue entity Type Currency currency Issue date Maturity date Coupon Rate Balance Increase Decrease Balance
Haitong Unitrust International Asset-based special plan RMB 1,140,000 25/11/2022 26/11/2024 3.18%-3.60% – 1,136,240 – 1,136,240
Financial Leasing Co., Ltd/Haitong
UT MSE Financial Leasing
(Shanghai) Co., Ltd
Unican Limited Overseas private USD 150,000 31/07/2019 31/07/2022 3.80% 970,422 72,122 1,042,544 –
placement bond
Haitong UT Brilliant Limited Medium-term notes USD 100,000 03/06/2021 03/06/2024 3.00% 601,447 80,102 8,713 672,836
Haitong UT Brilliant Limited Medium-term notes USD 200,000 27/04/2022 27/04/2025 4.20% – 1,428,136 29,551 1,398,585
Haitong International Securities Corporate bonds USD 700,000 19/07/2019 19/07/2024 3.38% 4,517,314 422,848 – 4,940,162
Group Ltd
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
F-344
Haitong International Securities Corporate bonds USD 400,000 18/11/2019 18/05/2025 3.13% 2,545,221 239,542 – 2,784,763
Group Ltd
Haitong International Securities Corporate bonds USD 400,000 02/07/2020 02/07/2023 2.13% 2,570,703 242,052 – 2,812,755
Group Ltd
Haitong International Securities Corporate bonds USD 300,000 20/05/2021 20/05/2026 2.13% 1,909,960 178,154 – 2,088,114
Group Ltd
Haitong International Finance Corporate bonds USD 670,000 12/03/2020 11/03/2025 2.11% 4,291,224 498,795 99,845 4,690,174
Holdings 2015 Limited
Haitong Investment Ireland PLC Medium-term notes EUR 6,777 28/12/2017 to 8/12/2022 to 0.98%-1.71% 45,880 – 35,374 10,506
23/07/2018 23/01/2026
Haitong Bank, S.A. Financial bond EUR 230,000 10/02/2022 10/02/2025 3.18% – 1,707,877 – 1,707,877
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
Haitong Bank, S.A. Financial bond USD 150,000 25/05/2022 31/05/2027 4.00% – 1,044,918 – 1,044,918
Haitong Banco de Investimento do Financial bond BRL 924,872 21/05/2018 to 03/01/2022 to 5.41%-15.55% 193,125 1,151,911 74,118 1,270,918
Brasil S.A. 29/12/2022 30/03/2026
Total 163,586,070 78,316,159 60,071,311 181,830,918
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 421
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
49. BONDS PAYABLE (CONTINUED)
2022/12/31 2021/12/31
Analysed for reporting purpose as:
Current liabilities 60,153,220 52,513,925
Non-current liabilities 121,677,698 111,072,145
181,830,918 163,586,070
As at 31 December 2022, bonds payable increased RMB18,245 million, with a percentage of 11.15%,
mainly due to the increase in the issuance of long-term debt instruments of the Group.
50. ACCOUNTS PAYABLE TO BROKERAGE CLIENTS
2022/12/31 2021/12/31
Accounts payable to brokerage clients 115,513,463 123,202,200
The majority of the accounts payable balance is repayable on demand except where certain accounts
payable to brokerage clients represent margin deposits received from clients for their trading activities
under normal course of business. Only the excess amounts over the required margin deposits stipulated
are repayable on demand.
Accounts payable mainly include cash held on behalf of clients at the banks and at the clearing houses
by the Group. Interest payable on accounts payable to brokerage clients shall be accrued according to
the prevailing benchmark interest rate.
F-345
422 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
51. CUSTOMER ACCOUNTS
2022/12/31 2021/12/31
Demand deposits – corporate 341,188 321,006
Time deposits – corporate 3,074,505 3,833,794
Demand deposits – individual 9,070 55
Time deposits – individual 1,893,712 1,789,636
5,318,475 5,944,491
Analysed for reporting purpose as:
Current liabilities 3,784,565 2,758,837
Non-current liabilities 1,533,910 3,185,654
5,318,475 5,944,491
52. CONTRACT LIABILITIES
2022/12/31 2021/12/31
Commodity trading 25,969 156,746
F-346
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 423
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
53. OTHER PAYABLES AND ACCRUALS
2022/12/31 2021/12/31
Payable to employees (Note i) 4,485,011 7,498,187
Short term finance lease guarantee deposits 2,706,970 3,832,682
Client settlement payables 2,222,899 750,543
Notes payable 2,047,521 2,899,881
Risk reserve 744,368 821,412
Amounts due to brokers 473,659 1,659,651
Other tax payable 468,323 722,417
Pending payable to clearing house 203,157 2,037,970
Commission and fee payables 9,632 19,481
Dividends payable 7,536 7,536
Others (Note ii) 9,617,007 9,791,241
22,986,083 30,041,001
Analysed for reporting purpose as:
Current liabilities 21,262,810 28,635,826
Non-current liabilities (Note i) 1,723,273 1,405,175
22,986,083 30,041,001
Notes:
(i) The Group sets up a detailed plan for the payment of accrued employees’ bonuses. According to the plan, a
balance of RMB373,068 thousand is expected to be settled after one year (31 December 2021: RMB424,063
thousand) and therefore classified as non-current liabilities.
(ii) Others mainly represent payables received in advance of the Group which are non-interest bearing and are
settled within one year.
F-347
424 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
54. PROVISIONS
2022/12/31 2021/12/31
Pending litigation 189,288 196,697
External guarantee 12,417 7,103
201,705 203,800
55. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
2022/12/31 2021/12/31
Financial liabilities held for trading 286,697 2,382,470
Liabilities arising from consolidation of structured entities 702,488 1,828,521
Designated as financial liabilities at fair value through profit or loss
(FVTPL) (Note)
– Structured products 16,122,780 8,078,933
– Gold option 279,483 –
– Income certificates 5,497,032 4,026,293
22,888,480 16,316,217
Analysed for reporting purpose as:
Current liabilities 5,478,358 10,456,105
Non-current liabilities 17,410,122 5,860,112
22,888,480 16,316,217
Notes:
As at 31 December 2022 and 31 December 2021, the difference between the fair values of the Group’s financial
liabilities designated at FVTPL and the contractual payables at maturity is not significant. The amounts of changes
in the fair value that are attributable to changes in the Group’s own credit risk are not significant during the year
ended 31 December 2022 and the year ended 31 December 2021.
As at 31 December 2022 and 31 December 2021, included in the Group’s financial liabilities designated at FVTPL
are structured notes issued by the Group, income certificates and non-controlling interests of consolidation of
structured entities.
F-348
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 425
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
56. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
2022/12/31 2021/12/31
Analysed by collateral type:
Stock 3,025,125 876,186
Bonds 87,906,636 80,060,042
Gold 10,762,596 10,975,724
101,694,357 91,911,952
Analysed by market:
Stock exchanges 42,830,883 38,841,695
Inter-bank market 48,100,878 42,094,533
OTC 10,762,596 10,975,724
101,694,357 91,911,952
Analysed for reporting purpose as:
Current liabilities 101,694,357 91,911,952
Sales and repurchase agreements are transactions in which the Group sells a security and simultaneously
agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date. Since
the repurchase prices are fixed, the Group is still exposed to substantially all the credit risks and market
risks and rewards of those securities sold. These securities are not derecognised from the financial
statements but regarded as “collateral” for the liabilities because the Group retains substantially all
the risks and rewards of these securities.
F-349
426 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
56. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS (CONTINUED)
The following tables provide a summary of carrying amounts or fair values related to transferred financial
assets of the Group and the associated liabilities:
As at 31 December 2022
Debt
instruments
Financial at fair value Debt Financial
assets at fair through other instruments assets held
value through comprehensive measured at under resale
profit or loss income amortised cost agreements Others Total
Carrying amount of transferred assets 53,182,215 31,378,291 1,133,028 470,972 23,631,866 109,796,372
Carrying amount of associated liabilities 48,926,215 28,968,402 1,103,113 352,793 22,343,834 101,694,357
Net position 4,256,000 2,409,889 29,915 118,179 1,288,032 8,102,015
As at 31 December 2021
Debt
instruments
Financial assets at fair value Debt Financial
at fair value through other instruments assets held
through profit comprehensive measured at under resale
or loss income amortised cost agreements Others Total
Carrying amount of transferred assets 49,477,280 23,966,069 101,712 719,802 25,187,767 99,452,630
Carrying amount of associated liabilities 44,991,712 22,425,310 99,526 569,279 23,826,125 91,911,952
Net position 4,485,568 1,540,759 2,186 150,523 1,361,642 7,540,678
F-350
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 427
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
57. PLACEMENTS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS
2022/12/31 2021/12/31
Placements from banks 3,244,643 6,649,257
Placements from CSFC 3,031,458 9,015,400
6,276,101 15,664,657
Analysed for reporting purpose as:
Current liabilities 3,218,363 12,723,438
Non-current liabilities 3,057,738 2,941,219
6,276,101 15,664,657
58. DEPOSITS FROM OTHER BANKS
2022/12/31 2021/12/31
Deposits from other banks – 72,787
59. SHARE CAPITAL
Listed A shares Listed H shares Total
Number of Number of Number of
shares Amount shares Amount shares Amount
000 000 000
Registered, issued and fully paid at
RMB1.0 per share:
As at 1 January 2022 9,654,631 9,654,631 3,409,569 3,409,569 13,064,200 13,064,200
As at 31 December 2022 9,654,631 9,654,631 3,409,569 3,409,569 13,064,200 13,064,200
As at 31 December 2022, the total share capital of the company is 13,064,200 thousand shares, of
which 781,250 thousand shares are subject to disposal restrictions (as at 31 December 2021: 1,171,953
thousand shares).
F-351
428 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
60. REVALUATION RESERVE
2022/12/31 2021/12/31
As beginning of the year 305,179 282,378
Debt instrument measured at fair value through other
comprehensive income
– Net fair value changes during the year (111,392) 275,043
– Reclassification adjustment to profit or loss on disposal (83,883) 73,630
– Reclassification adjustment to profit or loss for ECL (63,908) 83,512
– Income tax impact 44,121 (87,535)
Equity instrument measured at fair value through other
comprehensive income
– Net fair value changes during the period (1,462,092) (432,146)
– Transfer to retained earnings 400,167 (150,792)
– Income tax impact 220,280 143,478
Share of other comprehensive income of associates and
joint ventures 8,336 (2,193)
Actuarial gains on defined benefit obligations 80,357 39,131
Fair value gains on hedging instrument designated in
cash flow hedges 38,692 80,673
As end of the year (624,143) 305,179
61. RESERVES AND RETAINED EARNINGS
The amounts of the Group’s reserves and the movements therein during the year are presented in the
consolidated statement of changes in equity.
(a) Capital reserve
The balance of capital reserve mainly includes share premium arising from the issuance of new
shares at prices in excess of par value attributable to shareholders of the Company and other
capital reserve arising from equity transactions.
(b) Revaluation reserve
It mainly represents the fair value changes of debt instruments measured at FVTOCI and equity
instruments measured at FVTOCI.
F-352
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 429
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
61. RESERVES AND RETAINED EARNINGS (CONTINUED)
(c) General reserves
The general reserves comprise statutory reserve, general risk reserve and transaction risk reserve.
Pursuant to the Company Law of the PRC, 10% of the net profit of the Company, as determined
under the PRC accounting regulations and before distribution to shareholders, is required to be
transferred to a statutory reserve until such time when this reserve represents 50% of the share
capital of the Company. The reserve appropriated can be used for loss-covering, expansion of
production scale and capitalisation, in accordance with the Company’s articles of association or
approved by the shareholders in a shareholders’ general meeting.
In accordance with the Financial Rules for Financial Enterprises, the Company is required to
appropriate 10% of net profit derived in accordance with the relevant accounting rules in the
PRC before distribution to shareholders as general risk reserve from retained earnings.
Pursuant to the Securities Law of the PRC, the Company is required to appropriate 10% of the
net profit derived in accordance with the relevant accounting rules in the PRC before distribution
to shareholders as transaction risk reserve from retained earnings and cannot be distributed or
transferred to share capital.
For the year ended 31 December 2022, the Company transferred approximately RMB2,887,487
thousand to the statutory reserve, general risk reserve and transaction risk reserve pursuant to
the above regulatory requirements in the PRC (31 December 2021: RMB3,091,301 thousand).
Each of the Company’s statutory reserve, general risk reserve and transaction risk reserve
amounted to approximately RMB9,656,101 thousand as at 31 December 2022 (31 December
2021: RMB8,693,606 thousand).
The Company’s PRC subsidiaries are also subject to the statutory requirements to appropriate
their earnings to general reserves. The total amount of general reserves and transaction risk
reserve appropriated from the subsidiaries as at 31 December 2022 is RMB1,987,237 thousand
and RMB482,833 thousand (31 December 2021: RMB1,790,981 thousand and RMB441,413
thousand).
(d) Retained earnings
In accordance with the relevant regulations, the distributable profits of the Company is deemed
to be the lower of (i) the retained earnings determined in accordance with PRC GAAP and (ii)
the retained earnings determined in accordance with IFRSs.
F-353
430 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
62. PERPETUAL NOTES
2022/12/31 2021/12/31
Perpetual notes issued by UniTrust (Note i) 2,562,903 2,364,512
Perpetual notes issued by Haitong Bank (Note ii) – 26,937
2,562,903 2,391,449
Note:
(i) UniTrust issued renewable corporate bonds with value date on 1 March 2021 and principal amount of RMB
1,500,000 thousand on 26 February 2021. This issue is divided into two tranches of notes with principal
amount of RMB 1,200,000 thousand for Variety 1 and RMB 300,000 thousand for Variety 2. On 1 March
2022, UniTrust redeemed the above mentioned Variety 1 of the renewable corporate bonds with principal
amount of RMB 1,200,000 thousand in full amount.
UniTrust issued renewable corporate bonds with value date on 10 September 2021 and principal amount
of RMB 530,000 thousand on 9 September 2021.
UniTrust issued renewable corporate bonds with value date on 14 March 2022 and principal amount of
RMB 970,000 thousand on 11 March 2022.
UniTrust issued renewable corporate bonds with value date on 21 November 2022 and principal amount of
RMB 500,000 thousand on 17 November 2022.
The above financial instruments have no fixed maturity date and UniTrust has the right to defer the principal
in accordance with the contractual terms.
Unless the compulsory interest payment events mentioned below have occurred, UniTrust has the right to
choose to defer current interests and all deferred interests at each interest payment date without limit on
the number of times the interests deferred; Interest deferring under the situations mentioned above are not
considered as a breach of the contract for UniTrust.
UniTrust could not defer current interests and all deferred interests when the following compulsory interest
payment events occurred within 12 months before the interest payment date:
To declare and pay dividend to ordinary shareholders;
To decrease registered capital
F-354
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 431
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
62. PERPETUAL NOTES (CONTINUED)
(i) continued:
UniTrust issued a renewable trust plan with value date on 30 December 2021 and principal amount of RMB
300,000 thousand at 30 December 2021.
The above financial instrument has no fixed maturity date and UniTrust has the right to defer the principal
in accordance with the contractual terms.
Unless the compulsory interest payment events mentioned below have occurred, UniTrust has the right to
choose to defer current interests and all deferred interests at each interest payment date without limit on
the number of times the interests deferred. Interest deferred under the situations mentioned above are not
considered as a breach of the contract for UniTrust.
UniTrust could not defer current interests and all deferred interests when the following compulsory interest
payment events occurred within 6 months before the interest payment date:
To decrease registered capital or return the capital contribution of shareholders in cash or other
forms or invest in other forms;
To declare and pay dividend to ordinary shareholders.
Based on the terms and conditions mentioned above, the directors of UniTrust are of the view that UniTrust
has an unconditional right to avoid delivering cash or other financial assets. Accordingly, the above
renewable corporate bonds and renewable trust plan are recognised as other equity instruments under IAS
32 Financial Instruments: Presentation.
(ii) On 20 April 2022, Haitong Bank have fully early repaid the perpetual bonds, at the repayment price,
corresponding to the nominal value of EUR 3,731 thousand.
F-355
432 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
63. LONG-TERM PAYABLES
2022/12/31 2021/12/31
Finance lease guarantee deposits 4,303,758 5,207,591
Deferred income 422,792 435,446
Others 781,614 587,307
5,508,164 6,230,344
Long-term payables are mainly due to the guaranteed fund received by the Group through finance
lease business. These amounts will expire beyond one year upon contract agreement and are classified
as non-current liabilities.
64. CREDIT COMMITMENTS
As at 31 December 2022 and 2021, off-balance credit commitments can be analysed as follows:
2022/12/31 2021/12/31
Guarantees and standby letters of credit income 1,070,625 963,048
Irrevocable credit commitments 1,220,027 1,824,989
Guarantees and standby letters of credits are banking operations that may imply out-flow by the Group
only at default condition.
Irrevocable commitments represent contractual agreements to extend credit to the Haitong Bank’s
customers (e.g. unused credit lines). These agreements are, generally, contracted for fixed periods of
time or with other expiration requisites, and usually require the payment of a commission. Substantially,
all credit commitments require that clients maintain certain conditions verified at the time when the
credit was granted.
Notwithstanding the particular characteristics of these financial guarantees and commitments, the
analysis of these operations follows the same basic principles of any other commercial operation, namely
the solvency of the underlying client and business, being that Haitong Bank requires these operations
to be adequately covered by collaterals when needed.
Once as expected, the majority of these will expire without being used, the referred amounts are not
representative of the future cash-flows needs.
F-356
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 433
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
65. OPERATING LEASE ARRANGEMENTS
The Group as lessor
At the end of the reporting period, the Group had contracted with tenants for the following future
minimum lease payments:
2022/12/31 2021/12/31
Within one year 574,682 503,180
In the second year 556,922 552,931
In the third year 514,570 506,236
In the fourth year 474,325 467,847
In the fifth year 348,531 431,314
Over five years 829,418 1,072,989
3,298,448 3,534,497
66. CAPITAL COMMITMENTS
2022/12/31 2021/12/31
Capital expenditure in respect of acquisition of property and
equipment:
– Contracted but not provided 806,385 2,226,331
67. DIVIDENDS
2022/12/31 2021/12/31
Dividends recognised as distribution 3,919,260 3,266,050
According to the 2021 Haitong Securities annual general meeting of shareholders on 21 June 2022,
the general meeting of shareholders reviewed and approved the declaration of a 2021 dividend of
RMB3.00 per 10 shares (including tax) to all shareholders, with a total declared amount of RMB3,919
million including tax, paid in cash.
F-357
434 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
68. INVESTMENT IN SUBSIDIARIES
Company
2022/12/31 2021/12/31
Unlisted shares, at cost 37,648,658 36,897,561
Principal subsidiaries acquired through establishment or investment
Details of the principal subsidiaries:
Equity interest held by
the Group
Type of legal Place of As at As at
entity registered Incorporation/ 31 December 31 December
Name of subsidiary under PRC law establishment 2022 2021 Registered capital Principal activities
( ) Shanghai 51% 51% RMB 300,000,000 Fund management
HFT Investment Management Limited liability company
Co., Ltd. * (equity joint venture)
( ) Shanghai 100% 100% RMB 7,500,000,000 Private Equity investment
Haitong Capital Investment Co., Limited liability company management
Ltd.* (wholly owned)
N/A Hong Kong 100% 100% HKD 11,179,726,140 Investment holding
Haitong International Holdings
Limited*
( ) Shanghai 83% 67% RMB 1,301,500,000 Futures brokerage
Haitong Futures Co., Ltd.* Joint stock limited
company (listed
on NEEQ)
N/A Bermuda 68% 65% HKD 664,156,359 Investment holding
Haitong International Securities
Group Limited*
( ) Shanghai 100% 100% RMB 11,500,000,000 Financial products
Haitong Innovation Securities Limited liability company investment, equity
Investment Company Limited * (wholly owned) investment and
securities investment
F-358
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 435
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
68. INVESTMENT IN SUBSIDIARIES (CONTINUED)
Principal subsidiaries acquired through establishment or investment (Continued)
Details of the principal subsidiaries: (Continued)
Equity interest held by
the Group
Type of legal Place of As at As at
entity registered Incorporation/ 31 December 31 December
Name of subsidiary under PRC law establishment 2022 2021 Registered capital Principal activities
( ) Shanghai 100% 100% RMB 2,200,000,000 Securities asset
Shanghai Haitong Securities Limited liability company management
Asset Management Company (wholly owned)
Limited*
N/A Hong Kong 100% 100% HKD 4,146,162,881 Investment holding
Haitong UT Capital Group Co.,
Limited*
( ) Shanghai 85% 85% RMB 8,235,300,000 Leasing
Joint stock limited
Haitong UniTrust International company (listed)
Financial Leasing Co., Ltd.*
N/A Portugal 100% 100% EUR 863,278,725 Banking
Haitong Bank S.A. *
( ) Shanghai 100% 100% RMB 10,000,000 Real estate development,
Shanghai Weitai Properties Limited liability company property management
Management Co., Ltd.* (wholly owned) and catering
management
( ) Shanghai 100% 100% RMB 100,000,000 Industrial investment, real
Shanghai Zechun Investment & Limited liability company estate development
Development Co., Ltd.* (wholly owned) and Investment
management
Note:
* English translated name are for identification only.
F-359
436 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
68. INVESTMENT IN SUBSIDIARIES (CONTINUED)
Principal subsidiaries acquired through establishment or investment (Continued)
Details of non-wholly owned subsidiaries that have material non-controlling interests
The table below shows details of non-wholly-owned subsidiaries of the Group that have material non-
controlling interests:
Proportion of ordinary
shares and voting rights
held by non-controlling Profit allocated to non Accumulated non
Name of Placement of interests controlling interests controlling interests
subsidiary incorporation 2022/12/31 2021/12/31 2022/12/31 2021/12/31 2022/12/31 2021/12/31
HISGL Bermuda 32.08% 35.11% (1,858,850) 87,491 5,862,900 7,786,029
UniTrust PRC 15.00% 15.00% 216,467 198,880 2,465,209 2,356,403
Summarised financial information in respect of HISGL is set out below. The summarised financial
information below represents amounts before intragroup eliminations.
2022/12/31 2021/12/31
Current assets 64,366,743 75,711,318
Non-current assets 15,221,114 10,129,811
Current liabilities 51,210,830 51,509,314
Non-current liabilities 9,896,335 11,826,192
Total equity 18,480,692 22,505,623
2022 2021
Total income (1,031,750) 4,384,746
Profit for the year (5,637,723) 249,472
Other comprehensive income (276,095) 18,064
Total comprehensive income for the year (5,913,818) 267,536
Net cash (outflow)/inflow from operating activities (3,468,228) 12,854,273
Net cash outflow from investing activities (118,793) (89,686)
Net cash inflow/(outflow) from financing activities 1,773,760 (10,466,160)
Net cash (outflow)/inflow (1,813,261) 2,298,427
F-360
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 437
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
68. INVESTMENT IN SUBSIDIARIES (CONTINUED)
Principal subsidiaries acquired through establishment or investment (Continued)
Details of non-wholly owned subsidiaries that have material non-controlling interests
(Continued)
Summarised financial information in respect of UniTrust is set out below. The summarised financial
information below represents amounts before intragroup eliminations.
2022/12/31 2021/12/31
Current assets 57,624,834 61,867,266
Non-current assets 66,888,910 52,874,044
Current liabilities 57,560,786 57,562,341
Non-current liabilities 48,126,294 39,559,326
Total equity 18,826,664 17,619,643
2022/12/31 2021/12/31
Total income 8,861,946 8,953,184
Profit for the year 1,532,889 1,412,860
Other comprehensive income 129,743 73,782
Total comprehensive income for the year 1,662,632 1,486,642
2022/12/31 2021/12/31
Net cash outflow from operating activities (8,779,930) (3,751,311)
Net cash inflow/(outflow) from investing activities 179,826 (339,323)
Net cash inflow from financing activities 8,011,078 5,516,282
Net cash (outflow)/inflow (589,026) 1,425,648
F-361
438 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
69. INTERESTS IN CONSOLIDATED STRUCTURED ENTITIES
The Group had consolidated certain structured entities including asset management products. For
the asset management products where the Group acts as manager or invested in, the Group assesses
whether the combination of investments it held, if any, together with its remuneration and other
interests creates exposure to variability of returns from the activities of the asset management products
that is of such significance that it indicates that the Group is a principal.
The financial impact of these asset management products on the Group’s financial position as at 31
December 2022 and 2021, and the results and cash flows for the years ended 31 December 2022
and 2021, though consolidated, are not individually significant to the Group. Therefore, the financial
information of these consolidated structured entities is not disclosed individually.
Interests in all consolidated structured entities directly held by the Group amounted to fair value of
RMB31,422,817 thousand and RMB30,119,941 thousand at 31 December 2022 and 31 December
2021, respectively. It contains the interests in the subordinated tranche of those structured products
held by the Group. The Group provides credit enhancement to the senior tranche investors by holding
such subordinated tranche interests. As at 31 December 2022 and 31 December 2021, the fair value of
the Group’s interests in the subordinated tranche of those structured products is RMB10,497 thousand
and RMB370,590 thousand respectively.
70. INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES
Except for the structured entities the Group has consolidated as detailed in Note 69, in the opinion of
the directors of the Company, the variable returns the Group exposed to over the structured entities
that the Group acts as manager are not significant or does not have power over them. Therefore, the
Group did not consolidate these structured entities.
The carrying amount of unconsolidated structured entities in which the Group acted as investment
manager and held financial interests and its maximum exposure to loss in relation to those interests
amounted to RMB15,463,801 thousand and RMB13,448,955 thousand as at 31 December 2022 and
2021, respectively. Total management income from all structured entities in which the Group acted as
investment manager is RMB1,959,196 thousand and RMB3,139,995 thousand respectively.
In addition to those interests in unconsolidated structured entities managed by the Group as disclosed
above, the Group also has interests in unconsolidated structured entities in which the Group did not
act as investment manager. The total maximum exposure to loss in relation to the Group’s interests in
structured products is close to their respective carrying amounts.
F-362
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 439
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS
The emoluments of the Directors and Supervisors of the Company paid/payable by the Group for the
years ended 31 December 2022 and 2021 are set out below:
For the year ended 31 December 2022
Employer’s
contribution
to pension
Salary schemes
Director and annuity
Name fee commission Bonuses(a) plans Total(b)
Executive Directors:
Zhou Jie1 – 490 429 – 919
Li Jun2 – 920 62 – 982
Ren Peng3 – 828 56 – 884
Independent Non-executive
Directors:
Zhang Ming4 260 – – – 260
Lin Jiali5 240 – – – 240
Zhu Hongchao6 230 – – – 230
Zhou Yu7 250 – – – 250
Non-executive Directors
and Supervisors:
Tu Xuanxuan8 – – – – –
Zhou Donghui9 – – – – –
Yu Liping10 – – – – –
Xu Jianguo11 – – – – –
Tong Jianping12 – – – – –
Zhao Yonggang13 – 441 386 – 827
Shi Xu14 – 906 1,272 – 2,178
Wu Xiangyang15 – 695 1,011 – 1,706
Ruan Feng16 – – – – –
Li Zhenghao17 – – – – –
Cao Yijian18 – – – – –
Dong Xiaochun19 – – – – –
Dai Li20 – – – – –
980 4,280 3,216 – 8,476
F-363
440 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (CONTINUED)
For the year ended 31 December 2021
Employer’s
contribution
to pension
schemes
Director Salary and annuity
Name fee commission Bonuses(a) plans Total(b)
Executive Directors:
Zhou Jie1 – 490 1,325 – 1,815
Li Jun2 – 230 – – 230
Qu Qiuping21 – 690 1,380 – 2,070
Ren Peng3 – 828 1,242 – 2,070
Independent Non-executive
Directors:
Zhang Ming4 290 – – – 290
Lin Jiali5 200 – – – 200
Zhu Hongchao6 280 – – – 280
Zhou Yu7 290 – – – 290
Non-executive Directors
and Supervisors:
Tu Xuanxuan8 – – – – –
Zhou Donghui9 – – – – –
Yu Liping10 – – – – –
Xu Jianguo11 – – – – –
Zhao Yonggang13 – 257 193 – 450
Wu Hongwei22 – 184 707 – 891
Shi Xu14 – 665 2,072 – 2,737
Wu Xiangyang15 – 430 1,416 – 1,846
Ruan Feng16 – – – – –
Li Zhenghao17 – – – – –
Cao Yijian18 – – – – –
Dong Xiaochun19 – – – – –
Dai Li20 – – – – –
1,060 3,774 8,335 – 13,169
F-364
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 441
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (CONTINUED)
For the year ended 31 December 2021 (Continued)
Note:
(a) The bonuses are discretionary and are determined by reference to the Group’s and the individuals’
performance.
(b) The Company did not operate any share option scheme during the reporting periods. Details of the
subsidiary’s share option schemes are disclosed in note 73.
1 Mr. Zhou Jie was appointed as the Executive Director of the Company in September 2016, and the Chairman
of the Company in October 2016. Mr. Zhou Jie whose emoluments disclosed above include those for service
rendered by them as the Executive Director.
2 Mr. Li Jun was appointed as the Executive Director of the Company in September 2021, and the General
Manager of the Company in October 2021. Mr. Li Jun whose emoluments disclosed above include those
for service rendered by them as the Executive Director.
3 Mr. Ren Peng was appointed as the Executive Director of the Company in June 2019 and was appointed as
the Vice General Manager of the Company in November 1997. Mr. Ren Peng whose emoluments disclosed
above include those for service rendered by them as the Executive Director. Mr. Ren Peng resigned from
the position of the Vice General Manager and Executive Director of the Company in January 2023.
4 Mr. Zhang Ming was appointed as the Independent Non-executive Director of the Company in June 2016.
5 Mr. Lin Jiali was appointed as the Independent Non-executive Director of the Company in April 2017.
6 Mr. Zhu Hongchao was appointed as the Independent Non-executive Director of the Company in June 2019.
7 Mr. Zhou Yu was appointed as the Independent Non-executive Director of the Company in June 2019.
8 Mr. Tu Xuanxuan was appointed as the Non-executive Director of the Company in June 2019.
9 Mr. Zhou Donghui was appointed as the Non-executive Director of the Company in June 2020.
10 Mrs. Yu Liping was appointed as the Non-executive Director of the Company in June 2015.
11 Mr. Xu Jianguo was appointed as the Non-executive Director of the Company in October 2016.
12 Mr. Tong Jianping was appointed as the Chairman of the Supervisory Board in September 2022.
13 Mr. Zhao Yonggang was appointed as the Vice Chairman of the Supervisory Board in June 2021.
14 Mr. Shi Xu was appointed as the Supervisor of the Company in June 2019.
F-365
442 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
71. DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (CONTINUED)
For the year ended 31 December 2021 (Continued)
Note: (Continued)
15 Mr. Wu Xiangyang was appointed as the Supervisor of the Company in June 2019.
16 Mr. Ruan Feng was appointed as the Supervisor of the Company in October 2020.
17 Mr. Li Zhenghao was appointed as the Supervisor of the Company in June 2020.
18 Mr. Cao Yijian was appointed as the Supervisor of the Company in June 2019.
19 Mr. Dong Xiaochun was appointed as the Supervisor of the Company in October 2020.
20 Mrs. Dai Li was appointed as the Supervisor of the Company in June 2019.
21 Mr. Qu Qiuping was appointed as the General Manager and Executive Director of the Company in June
2014. Mr. Qu Qiuping resigned from the position of the General Manager and Executive Director of the
Company in September 2021.
22 Mr. Wu Hongwei was appointed as the Vice Chairman of the Supervisory Board in December 2017. Mr. Wu
Hongwei resigned from the position of the Vice Chairman of the Supervisory Board in June 2021.
The executive directors’ emoluments shown above were for their services in connection with the
management of the affairs of the Company and the Group.
The independent non-executive directors’ emoluments shown above were for their services as directors
of the Company.
The supervisors’ emoluments shown above were for their services and their employments as supervisors
of the Company.
For the years ended 31 December 2022 and 2021, no directors or supervisors of the Company waived
any emoluments and no emoluments were paid by the Company to any of the directors or supervisors
as an inducement to join or upon joining the Group or as compensation for redundancy.
The total remuneration received from the Company during the Reporting Period is the remuneration
attributable to and paid in 2022 and excludes deferred remuneration attributable to the previous years
and paid in 2022. In particular, Mr. Zhou Jie received RMB0.6034 million; Mr. Li Jun received RMB0.1533
million; Mr. Ren Peng received RMB0.4140 million; Mr. Zhao Yonggang received RMB0.209 million;
Mr. Shi Xu received RMB0.3780 million; Mr. Wu Xiangyang received RMB0.2822 million.
F-366
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 443
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
72. HIGHEST PAID INDIVIDUALS
Of the five individuals with the highest emoluments, none of them are directors, supervisors or senior
management. Details of the remuneration of the five highest paid employees during the year ended
2022 and 2021 are as follows:
2022 2021
Salary and commission 6,187 9,795
Bonuses 42,465 43,120
Employer’s contribution to pension schemes/annuity plans – 246
48,652 53,161
Bonuses are discretionary and are determined by reference to the Group’s and the individuals’
performance. No emoluments have been paid to or receivable by these individuals as an inducement to
join or upon joining the Group or as compensation for loss of office for the years ended 31 December
2022 and 2021.
The emoluments of the highest-paid individuals of the Group fall within the following bands:
2022 2021
Number of Number of
employees employees
Emolument bands
– RMB9,000,001 to RMB9,500,000 1 1
– RMB9,500,001 to RMB10,000,000 4 1
– RMB10,000,001 to RMB10,500,000 – 1
– RMB10,500,001 to RMB11,000,000 – –
– RMB11,000,001 to RMB11,500,000 – 1
– RMB11,500,001 to RMB12,000,000 – –
– RMB12,000,001 to RMB12,500,000 – 1
5 5
F-367
444 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES
2015 Share option scheme of HISGL
The shareholders of HISGL approved the adoption of a new share option scheme (the “2015 Share
Option Scheme”) on 8 June 2015 (the “Adoption Date”). The 2015 Share Option Scheme was also
approved by the shareholders of HSCL, the holding company of Haitong International Holdings Limited,
the controlling shareholder of HISGL, and Listing Committee of The Stock Exchange of Hong Kong
Limited on 8 June 2015 and 12 June 2015 respectively. A summary of the principal terms of the 2015
Share Option Scheme, as disclosed in accordance with the Listing Rules, is set out as follows:
The 2015 Share Option Scheme was adopted to attract, retain and motivate talented employees to
strive towards long term performance targets set by the Group and to provide them with an incentive
to work better for the interest of the Group. Under the 2015 Share Option Scheme, share options could
be granted to any full time or part-time employee, executive and non-executive (whether independent
or not) directors of the Group, who, in the absolute opinion of the Board, have contributed to HISGL
or the Group.
The maximum number of shares of HISGL (the “Shares”) which may be issued upon exercise of all
options to be granted under the 2015 Share Option Scheme and any other share option schemes shall
not in aggregate exceed 212,924,439 shares, representing approximately 10% of the issued shares of
HISGL as at 30 November 2014, being the date of tentative approval of the 2015 Share Option Scheme
by the management of HISGL.
In respect of the period of 12 months from the Adoption Date and for each of the subsequent periods
of 12 months from the previous anniversary of the Adoption Date (each of those 12-months periods is
hereinafter referred to as a “Scheme Year”), the total number of shares of HISGL which may be issued
upon exercise of the options granted in each Scheme Year shall not exceed 21,292,444 shares (the
“Annual Limit”). HISGL may from time to time seek approval of its shareholders and the approval of
the shareholders of HSCL (so long as HISGL is a subsidiary of HSCL under the Listing Rules) in respective
general meetings to renew the Scheme Limit and/or the Annual Limit such that the total number of
shares of HISGL in respect of which options may be granted by directors of HISGL under the 2015 Share
Option Scheme (i) in respect of the Scheme Limit, shall not exceed 10% of the issued share capital of
HISGL as at the date of approval of the refreshment; and (ii) in respect of the Annual Limit, shall not
exceed 1% of the issued share capital of HISGL as at the date of approval of the refreshment. Options
previously granted under the 2015 Share Option Scheme and any other share option schemes of HISGL
(including those outstanding, cancelled, lapsed or exercised options) will not be counted for the purpose
of calculating such limits as refreshed.
Notwithstanding the aforesaid in previous paragraph, the maximum number of shares which may be
issued upon exercise of all outstanding options granted and yet to be exercised under the 2015 Share
Option Scheme and any other share option schemes of HISGL shall not exceed 30% (or such higher
percentage as may be allowed under the Listing Rules) of the total number of shares in issue from
time to time.
F-368
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 445
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The maximum number of shares issued and to be issued upon exercise of the options granted to
each participant under the 2015 Share Option Scheme and any other share option schemes of HISGL
(including both exercised and outstanding options) in any 12-month period shall not exceed 1% of
the total number of HISGL’s shares in issue. Any further grant of share options in excess of this limit
is subject to approval by the shareholders of HISGL at a general meeting.
Share options granted to a director, chief executive or substantial shareholders of HISGL, or to any
of their associates, are subject to approval in advance by the independent non-executive directors.
In addition, any share options granted to a substantial shareholder or an independent non-executive
director of HISGL, or to any of their associates, in excess of 0.1% of the total number of shares of HISGL
in issue at the date on which such grant is proposed by the directors or with an aggregate value (based
on the closing price of HISGL’s shares at the date on which such grant is proposed by the directors) in
excess of HK$5 million, within any 12-month period, are subject to shareholders’ approval in advance
at a general meeting of HISGL.
The offer of a grant of share options may be accepted within 28 days from the date of the offer upon
payment of a consideration of HK$1 by the grantee. The exercise period of the share options granted
is determinable by the directors of HISGL and notified by the directors of HISGL to each participant
as being the period during which an option may be exercised, and in any event such period of time
shall not exceed a period of 5 years, commencing on the Offer Date and expire on the last day of such
period. The 2015 Share Option Scheme does not stipulate any performance target which needs to be
achieved by the participant who accepts the offer of share options (the “Grantee”) before the share
options can be exercised. In order to sustain a long-term employment relationship between HISGL and
the Grantee(s), grantees must hold their share options for a holding period of not less than 6 months
from the date of acceptance of the offer by the Grantee, before the share options can be exercised.
F-369
446 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The exercise price of the share options is determinable by the directors, and shall be at least the highest
of (i) the price equal to 110% of the closing price of HISGL’s shares as stated in the Stock Exchange’s
daily quotations sheet on the offer date; (ii) the average closing price of HISGL’s shares as stated in
the Stock Exchange’s daily quotations sheets for the 5 trading days immediately preceding the offer
date; and (iii) the nominal value of HISGL’s shares. Share options do not confer rights on the holders
to dividends or to vote at shareholders’ meetings.
On 21 July 2021, HISGL granted 10,645,000 share options at the exercise price of HK$2.398 per share
to its directors and employees under the 2015 Share Option Scheme with a total of 9,845,000 share
options being accepted. The exercise period of the share options is from 17 February 2022 to 20 July
2026. All the share options granted have a vesting period of 6 months from the date of acceptance.
The closing price of HISGL’s shares on the date of grant was HK$2.18 per share.
The estimated fair values of the options granted under 2015 Share Option Scheme on the grant date on
21 July 2021 is approximately HK$3.6 million, which was calculated using the Binomial Option Pricing
model with the key inputs into the model as disclosed below.
2021
Weighted average share price at the date of grant HK$2.18
Initial exercise price HK$2.398
Expected volatility 37.533%
Expected option life 5 years
Risk-free rate 0.495%
Expected dividend yield 7.514%
Early exercise multiples – directors of HISGL 1.68
– employees 1.91
Expected volatility was determined using the historical volatility of HISGL’s share price over the previous
5 years at the grant date.
On 6 September 2022, HISGL granted 10,635,000 share options at the exercise price of HK$0.935 per
share to its directors and employees under the 2015 Share Option Scheme with a total of 10,570,000
share options being accepted. The exercise period of the share options is from 3 April 2023 to 5
September 2027. All the share options granted have a vesting period of 6 months from the date of
acceptance. The closing price of HISGL’s shares on the date of grant was HK$0.85 per share.
F-370
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 447
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The estimated fair values of the options granted under 2015 Share Option Scheme on the grant date
on 6 September 2022 is approximately HK$1.3 million, which was calculated using the Binomial Option
Pricing model with the key inputs into the model as disclosed below.
2022
Weighted average share price at the date of grant HK$0.85
Initial exercise price HK$0.935
Expected volatility 38.168%
Expected option life 5 years
Risk-free rate 3.05%
Expected dividend yield 10.481%
Early exercise multiples – directors of HISGL 1.68
– employees 1.91
Expected volatility was determined using the historical volatility of HISGL’s share price over the previous
5 years at the grant date.
For the year ended 31 December 2022, the Group has recognised an equity-settled share-based
compensation expense of HK$1,540 thousand equivalent to RMB1,376 thousand (for the year ended 31
December 2021: HK$2,678 thousand, equivalent to RMB2,190 thousand) for the share options under
the 2015 Share Option Scheme in the consolidated statement of profit or loss.
The following table discloses movements of share options granted to the directors and employees of
the Group.
2022 2021
Weighted Weighted
average Number of average Number of
exercise price options exercise price options
HKD 000 HKD 000
per share per share
At beginning of the year 2.860 40,551 3.369 62,102
Granted and accepted during
the year 0.935 10,570 2.398 9,845
Adjusted during the year (note) 2.590 3,998 – –
Exercise during the year – – 1.727 (1,750)
Forfeited during the year 3.880 (9,957) 3.840 (29,646)
At end of the year 1.930 45,162 2.860 40,551
F-371
448 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
2015 Share option scheme of HISGL (Continued)
The exercise prices and exercise periods of the share options outstanding as at respective reporting
dates are as follows:
31 December 2022 Exercise price
Number of options HKD$ per share Exercise period
000 (note)
– 4.547 7 June 2018 – 9 November 2022
11,599 2.635 28 May 2019 – 31 October 2023
6,439 2.322 27 December 2019 – 30 May 2024
7,419 1.570 25 December 2020 – 28 May 2025
9,295 2.180 17 February 2022 – 20 July 2026
10,410 0.935 3 April 2023 – 5 September 2027
45,162
31 December 2021 Exercise price
Number of options HKD$ per share Exercise period
000 (note)
6,546 5.002 7 June 2018 – 9 November 2022
11,125 2.898 28 May 2019 – 31 October 2023
6,340 2.554 27 December 2019 – 30 May 2024
7,345 1.727 25 December 2020 – 28 May 2025
9,195 2.398 17 February 2022 – 20 July 2026
40,551
Note: The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, scrip
dividend, or bonus shares, or other similar changes in HISGL’s share capital.
As at 31 December 2022, HISGL had 45,161,765 (31 December 2021: 40,551,041) share options
outstanding under the 2015 Share Option Scheme, which represented approximately 0.68% (31
December 2021: 0.67%) of HISGL’s shares in issue as at that date.
The exercise in full of the remaining share options would, under the present capital structure of
HISGL, result in the issue of 45,161,765 (2021: 40,551,041) additional ordinary shares of HISGL and
additional share capital of HK$4,516 thousand equivalent to RMB4,034 thousand (2021: HK$4,055
thousand, equivalent to RMB3,315 thousand) and share premium of HK$82,642 thousand equivalent
to RMB73,822 thousand (2021: HK$111,855 thousand, equivalent to RMB91,453 thousand) (before
issue expenses).
F-372
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 449
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL
On 19 December 2014, the Board adopted a 10-year share award scheme (the “Scheme”) to incentivise
selected employees or directors (“Selected Participants”) for their contributions to the Group and to
attract suitable personnel for further development of the Group.
Pursuant to the Scheme, the ordinary shares of HK$0.1 each in the capital of HISGL will be acquired by
the trustee at the cost of HISGL and will be held in trust for the Selected Participants before vesting.
The total number of shares granted under the Scheme shall be limited to 10% of the total issued share
capital of HISGL as at 19 December 2014 (the “Adoption Date”) or such other percentage as determined
by the Board from time to time.
No award of the shares shall be granted to any single Selected Participant which would result in the
maximum number of awarded shares under the Scheme in the 12-month period up to and including
the date of such grant representing in aggregate over 1% of the issued share capital of HISGL as at
the Adoption Date.
The Board has delegated the power and authority to the Administration Committee to handle
administrative matters of the Scheme but all major decisions in relation to the Scheme shall be made
by the Board unless expressly provided for in the Scheme rules pursuant to the Scheme or the Board
resolves to delegate such power to the Administration Committee.
Pursuant to the Scheme rules, the Administration Committee may, from time to time, at its absolute
discretion and subject to such terms and conditions as it may think fit (including the basis of eligibility
of each Participant) select any participant (excluding any excluded participants as defined under the
Scheme rules) for participation in the Scheme as a Selected Participant and determine the number of
awarded shares, save and except that the selection of a director of HISGL as a Selected Participant, the
terms and conditions of the award to such director and the number of award shares thereunder shall
be approved by the Board upon the recommendation of the Remuneration Committee.
After the selection of the Selected Participant(s) and the determination of the number of awarded shares
by the Board or the Administration Committee, as the case may be, the Administration Committee
shall inform the trustee accordingly. The Administration Committee shall also inform the Selected
Participant(s) by award notice. Provided that the respective Selected Participant(s) has (have) executed
the relevant acceptance form(s) and returned the same together with a counterpart of the award
notice(s) to the trustee through HISGL within the period prescribed in the award notice(s), HISGL shall
during the award period pay or cause to be paid to the trustee for purchasing the awarded shares
(“Reference Amount”).
F-373
450 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL (Continued)
After receiving the Reference Amount, the Trustee shall apply the same towards the purchase of
awarded shares in the market through a broker at the prevailing market price on the Stock Exchange
pursuant to the Scheme Rules and HISGL would recognise as treasury shares in the consolidated
statement of changes in equity.
The Administration Committee shall conduct a review of the performance conditions (if any) in relation
to each Selected Participant at least once in each financial year during the award period if the award
period is more than 12 months or once only during the award period if the award period is less than
12 months. The awarded shares will be vested if the Selected Participant is able to meet the relevant
service conditions during the relevant period, or lapsed if the Selected Participant is unable to meet
the relevant service conditions during the relevant period.
A Selected Participant shall not exercise or direct the trustee to exercise and the trustee shall not exercise
the voting rights in respect of any awarded shares held under the trust.
Details of the awarded shares granted and unvested as at 31 December 2022 are set out below.
Number of Number of Number of Number of Fair value
Date of awarded awarded shares awarded shares awarded shares awarded shares as at
shares granted granted vested lapsed unvested Vesting dates grant date
(note (g)) HKD
25 March 2019 6,848,366 5,678,547 1,169,819 – note (a) 21,024,000
29 October 2019 8,175,000 6,635,000 1,540,000 – note (b) 18,557,000
25 March 2020 14,294,205 8,092,251 2,908,024 3,293,930 note (c) 28,731,000
25 March 2021 29,000,000 29,000,000 – – note (d) 69,890,000
31 August 2021 36,788,082 27,225,412 1,247,600 8,315,070 note (e) 82,773,000
8 September 2022 9,453,454 9,102,015 – 351,439 note (f) 8,413,000
For the shares granted, the fair value of the shares were measured at the market price of HISGL’s
shares. For the year ended 31 December 2022, the Group has recognised an equity settled share-based
payment of RMB35,114 thousand (for the year ended 31 December 2021: RMB106,824 thousand) for
the Scheme in consolidated statement of profit or loss.
F-374
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 451
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL (Continued)
As at 31 December 2022, HISGL did not have any awarded shares granted on 25 March 2019 which
were outstanding under the Scheme (31 December 2021: 1,620,854). During the current year, none
(2021: 433,949) and 1,620,854 (2021: 1,933,971) awarded shares granted on 25 March 2019 were
lapsed and vested respectively.
As at 31 December 2022, HISGL did not have any awarded shares granted on 29 October 2019 which
were outstanding under the Scheme (31 December 2021: 1,635,000). During the current year, none
(2021: 740,000) and1,635,000 (2021: 2,385,000) awarded shares granted on 29 October 2019 were
lapsed and vested respectively.
As at 31 December 2022, HISGL had 3,293,930 (31 December 2021: 7,506,259) awarded shares granted
on 25 March 2020 which were outstanding under the Scheme. During the current year, 479,106 (2021:
1,597,936) and 3,733,223 (2021: 4,359,028) awarded shares granted on 25 March 2020 were lapsed
and vested respectively.
As at 31 December 2022, HISGL had no awarded shares granted on 25 March 2021 which were
outstanding under the Scheme.
As at 31 December 2022, HISGL had 8,315,070 (31 December 2021: 20,799,843) awarded shares
granted on 31 August 2021 which were outstanding under the Scheme. During the current year,
1,060,000 (2021: 187,600) and 11,424,773 (2021: 15,800,639) awarded shares granted on 31 August
2021 were lapsed and vested respectively.
As at 31 December 2022, HISGL had 351,439 awarded shares granted on 8 September 2022 which
were outstanding under the Scheme. During the current year, none awarded shares granted on 8
September 2022 were lapsed and 9,102,015 awarded shares granted on 8 September 2022 were
vested respectively.
F-375
452 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL (Continued)
Notes:
(a) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 25 March 2019
was on 23 March 2020 while the vesting date of another one-third of award shares granted on 25 March
2019 would be on 23 March 2021 and the vesting date for the remaining would be on 23 March 2022.
(b) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 29 October
2019 was on 2 January 2020 while the vesting date of another one-third of award shares granted on 29
October 2019 would be on 2 January 2021 and the vesting date for the remaining would be on 2 January
2022.
(c) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 25 March 2020
was on 24 March 2021 while the vesting date of another one-third of award shares granted on 25 March
2020 would be on 24 March 2022 and the vesting date for the remaining would be on 24 March 2023.
(d) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 25 March 2021
was on 30 April 2021.
(e) Pursuant to the agreed terms, the vesting date of one-third of the award shares granted on 31 August
2021 was on 30 September 2021 while the vesting date of another one-third of award shares granted on
31 August 2021 would be on 30 September 2022 and the vesting date for the remaining would be on 30
September 2023.
(f) Pursuant to the agreed terms, the vesting date of 8,641,329 award shares granted on 8 September 2022
was on 30 September 2022 while the vesting date of another 282,114 and 178,572 award shares granted
on 8 September 2022 were on 30 November 2022 and 31 December 2022 respectively. The remaining
351,439 award shares would be vested on the agreed schedule during 2023 to 2026.
(g) Awarded Shares would lapse prior to their vesting date as a result of staff separations. Pursuant to
the agreement, the lapsed shares would be held by the trustee which is subject to the approval from
Administration Committee for re-selection of any Selected Participant. The lapsed Awarded Shares were
transferred out from share award reserve to share premium as disclosed in the consolidated statement of
changes in equity.
F-376
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 453
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
73. OTHER DISCLOSURES RELATED TO SUBSIDIARIES (CONTINUED)
Share award scheme of HISGL (Continued)
Movements of shares held under the Scheme during the year are as follows:
2022 2021
Number of Number of
HKD’000 shares HKD’000 shares
As at 1 January 269,732 117,409,723 389,986 172,705,979
Purchased during the year 17,670 14,662,000 – –
Shares issued under bonus issue – 12,508,264 – –
Vested and transferred out during
the year (56,538) (27,515,865) (120,254) (55,296,256)
As at 31 December 230,864 117,064,122 269,732 117,409,723
74. RELATED PARTY TRANSACTIONS
In addition to the joints and associates of the Group set out in note 25 above, the name and the
relationship of other related parties are set out as below:
Name of the related party Relationship of the related party
Shanghai Guosheng (Group) Co., Ltd. Shareholders with shareholdings of 5% or above in
the company
Bright Foods (Group) Co., Ltd. Significant influence
Shanghai Electric (Group) Corp. Significant influence
F-377
454 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
74. RELATED PARTY TRANSACTIONS (CONTINUED)
The Group’s major transactions with related parties are as follows:
2022 2021
Commission and fee income from:
– Fullgoal Fund Management Co., Ltd. 180,068 190,721
– CCTV Financial Media Industry Investment Fund
(Limited Partnership) 66,495 –
– Xi’an Aerospace and New Energy Industry Fund 35,963 7,787
– Shanghai Equity Investment Fund II (Limited Partnership) 28,328 15,205
– Liaoning energy investment (Group) Co., Ltd. 25,491 25,472
– Liaoning China-Germany Industrial Equity Investment Fund
(Limited Partnership) 17,000 16,981
– Shanghai Cultural Industries Investment Fund
(Limited Partnership) 13,847 17
– Xi’an Aerospace Haitong Innovative New Materials Equity
Investment Partnership (Limited Partnership) 13,710 –
– Haitong Xingtai (Anhui) Emerging Industry Investment Fund
(Limited Partnership) 11,463 23,151
– Jilin Modern Agricultural and Emerging Markets Investment
Fund Limited 9,522 22,267
– Xi’an Civil-Military Integration Satellite Investment Fund Co., Ltd. 5,013 4,505
– Guangdong South Media Integration Fund (Limited Partnership) 4,290 4,441
– Anhui Wanneng Haitong Dual Carbon Industry M &
A Investment Fund Partnership (Limited Partnership) 3,583 –
– Shanghai Guosheng (Group) Co., Ltd. 2,019 3,562
– Xuchang Haitong Innovation Equity Investment Fund Limited
Partnership 1,509 94
– Jilin Haitong Innovation Satellite Investment Center
(Limited Partnership) 1,415 –
– Haitong (Jilin) Equity Investment Fund (Limited Partnership) 1,160 1,689
– Jilin Haichuang Changxin Investment Center (Limited Partnership) 1,155 –
– Shanghai Electric (Group) Corp. 307 697
– Jiaxing Haitong Xuchu Equity Investment Fund Limited
Partnership 53 4,885
– Bright Foods (Group) Co., Ltd. 53 4,104
– Shanghai Equity Investment Fund (Limited Partnership) 50 15,235
– Hefei Haitong Huiyin Equity Investment Partnership
(Limited partnership) – 8,491
– Haitong (Jilin) Modern Service Industry Investment Fund
(Limited Partnership) – 1,283
– Shanghai Tongguan Investment Management Partnership
(Limited partnership) – 503
F-378
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 455
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
74. RELATED PARTY TRANSACTIONS (CONTINUED)
2022 2021
Net interest income from
– Shanghai Guosheng (Group) Co., Ltd. 802 149
– Shanghai Electric (Group) Corp. 373 855
– Jiaxing Haitong Xuchu Equity Investment Fund Limited
Partnership 354 2
– Xi’an Aerospace Haitong Innovative New Materials Equity
Investment Partnership (Limited Partnership) 352 –
– Xi’an Aerospace and New Energy Industry Fund 237 355
– Others 436 666
Net investment income
– Shanghai Guosheng (Group) Co., Ltd. 6,253 (3,603)
– Shanghai Equity Investment Fund (Limited Partnership) – 5,630
2022/12/31 2021/12/31
Accounts receivables from:
– Xi’an Aerospace and New Energy Industry Fund 33,055 –
– Haitong Xingtai (Anhui) Emerging Industry Investment Fund
(Limited Partnership) 32,881 –
– Shanghai Cultural Industries Investment Fund
(Limited Partnership) 31,758 17,080
– Xi’an Aerospace Haitong Innovative New Materials Equity
Investment Partnership (Limited Partnership) 8,369 –
– Shanghai Guosheng (Group) Co., Ltd. 684 585
– Others 140 40
F-379
456 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
74. RELATED PARTY TRANSACTIONS (CONTINUED)
2022/12/31 2021/12/31
Accounts payable to brokerage clients
– Shanghai Equity Investment Fund (Limited Partnership) (57,192) (926)
– Shanghai Equity Investment Fund II (Limited Partnership) (50,065) (31)
– Bright Foods (Group) Co., Ltd. (23,476) (11)
– Shanghai Electric (Group) Corp. (15,398) (7,762)
– Jiaxing Haitong Xuchu Equity Investment Fund Limited
Partnership (2,414) (304)
– Xi’an Aerospace and New Energy Industry Fund (826) (150,000)
– Shanghai Guosheng (Group) Co., Ltd. (9) (174,699)
– Others (33) (159)
Accounts payable to
– Shanghai Guosheng (Group) Co., Ltd. (56,980) (91,600)
Derivative financial assets
– Shanghai Guosheng (Group) Co., Ltd. 2,310 949
The remuneration of the key management personnel of the Group was as follows (Note):
Year ended 31 December
2022 2021
Short-term benefits:
– Fees, salaries, commission and bonuses 36,962 66,790
Post-employment benefits:
– Employer’s contribution to pension schemes/annuity plans 1,224 1,054
Note: The total pre-tax compensation received by the key management personnel of the Group during the
reporting period is comprised of salaries attributable to 2022 and disbursed in that year. The foreign currency
income portion was converted by the middle rate of RMB exchange rate published by the China Foreign
Exchange Trading Center at the end of 2022. It should be noted that the amount of RMB20,151 thousand
of compensation attributable to prior years, which is deferred to 2022, is excluded from the aforementioned
total.
F-380
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 457
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
75. STATEMENT OF FINANCIAL POSITION AND RESERVE OF THE COMPANY
2022/12/31 2021/12/31
Non-current assets
Property and equipment 8,013,297 8,049,110
Right-of-use assets 492,978 503,127
Investment properties 13,081 14,156
Other intangible assets 365,223 326,010
Investments in subsidiaries 37,648,658 36,897,561
Investments accounted for using equity method 2,151,252 1,957,895
Equity instruments at fair value through other
comprehensive income 5,361,535 10,183,589
Debt instruments at fair value through other
comprehensive income 44,642,989 31,666,415
Financial assets at fair value through profit or loss 3,385,948 3,221,175
Financial assets held under resale agreements 50,071 575,403
Deferred tax assets 1,641,765 2,307,574
Total non-current assets 103,766,797 95,702,015
Current assets
Advances to customers on margin financing 56,840,362 67,692,375
Accounts receivable 4,490,817 1,948,966
Debt instruments at fair value through other
comprehensive income 6,015,496 3,511,075
Financial assets at fair value through profit or loss 136,567,567 143,813,600
Derivative financial assets 869,903 354,430
Financial assets held under resale agreements 26,589,823 28,762,510
Other receivables and prepayments 4,839,404 3,547,890
Deposits with exchanges 6,187,577 3,949,885
Clearing settlement funds 31,643,792 23,908,471
Bank balances and cash 94,195,714 93,457,408
Total current assets 368,240,455 370,946,610
Total assets 472,007,252 466,648,625
F-381
458 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
75. STATEMENT OF FINANCIAL POSITION AND RESERVE OF THE COMPANY
(CONTINUED)
2022/12/31 2021/12/31
Current liabilities
Borrowings – 2,237
Short-term financing bills payables 7,211,240 13,316,578
Bonds Payable 38,039,857 32,879,392
Accounts payable to brokerage clients 69,201,352 72,910,212
Other payables and accruals 8,567,455 12,533,410
Amount due to subsidiaries 81,541 56,020
Lease liabilities 127,112 134,889
Tax liabilities – 1,106,393
Financial liabilities at fair value through profit or loss 1,427,432 476,840
Derivative financial liabilities 738,108 619,042
Financial assets sold under repurchase agreements 93,412,806 89,332,831
Placements from other financial institutions 3,031,458 10,015,659
Total current liabilities 221,838,361 233,383,503
Net current assets 146,402,094 137,563,107
Total assets less current liabilities 250,168,891 233,265,122
Equity
Share capital 13,064,200 13,064,200
Capital reserve 74,709,021 74,772,635
Revaluation reserve (393,603) 411,800
General reserves 28,968,304 26,080,817
Retained earnings 32,697,861 30,179,778
Total equity 149,045,783 144,509,230
Non-current liabilities
Long-term borrowings – 2,092,000
Bonds payables 83,009,677 80,354,269
Other payables and accruals 346,592 310,994
Financial liabilities at fair value through profit or loss 17,407,216 5,639,743
Lease liabilities 359,623 358,886
Total non-current liabilities 101,123,108 88,755,892
Total equity and non-current liabilities 250,168,891 233,265,122
F-382
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 459
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
75. STATEMENT OF FINANCIAL POSITION AND RESERVE OF THE COMPANY
(CONTINUED)
Share Capital Revaluation General Retained
Capital Reserve reserve Reserves Earnings Total
(Note)
As at 1 January 2022 13,064,200 74,772,635 411,800 26,080,817 30,179,778 144,509,230
Profit for the year – – – – 9,624,955 9,624,955
Other comprehensive income for the year – – (1,105,528) – – (1,105,528)
Total comprehensive income for the year – – (1,105,528) – 9,624,955 8,519,427
Appropriation to general reserves – – – 2,887,487 (2,887,487) –
Cash dividends recognised as distribution – – – – (3,919,260) (3,919,260)
Disposal of equity instruments at fair value
through other comprehensive income – – 300,125 – (300,125) –
Others – (63,614) – – – (63,614)
As at 31 December 2022 13,064,200 74,709,021 (393,603) 28,968,304 32,697,861 149,045,783
As at 1 January 2021 13,064,200 74,772,635 499,138 22,989,516 26,119,699 137,445,188
Profit for the year – – – – 10,304,336 10,304,336
Other comprehensive income for the year – – 25,756 – – 25,756
Total comprehensive income for the year – – 25,756 – 10,304,336 10,330,092
Appropriation to general reserves – – – 3,091,301 (3,091,301) –
Cash dividends recognised as distribution – – – – (3,266,050) (3,266,050)
Disposal of equity instruments at fair value
through other comprehensive income – – (113,094) – 113,094 –
As at 31 December 2021 13,064,200 74,772,635 411,800 26,080,817 30,179,778 144,509,230
Note: Capital reserve of the Company represents primarily the share premium arisen from the issuance of the
Company’s shares.
F-383
460 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT
Risk Management Policy and Organizational Structure
Risk Management Policy
The Group pays great attention on risk prevention and control with the principles of “pragmatic,
pioneering, steady and excellent” operation and “being prudent and even conservative” risk
management, giving priorities for compliance and risk management in terms of company operation. The
Group has established a sound and effective risk management framework in accordance with relevant
regulations, laws and regulatory requirements strictly. Engraved with the bottom line of compliance, the
Group prevents the compliance risk, money laundering risk and terrorist financing risk through all kinds
of compliance management instruments and compliance monitoring approaches, and the Company also
allocates asset steadily, standardizes business processes and comprehensively strengthens prevention,
monitoring and post-control for various risks by measuring risks through approaches such as credit
investigation and extension, duration analysis, foreign exchange exposure analysis, value at risk analysis,
the minimum survival period calculation of the cash flow, gap analysis, sensitivity analysis and stress
test, also by establishing a monitoring system for risk control indicators such as net capital. Meanwhile,
the Company has integrated the T+1 risk data management of subsidiaries at home and abroad into
a unified system to implement vertical risk management, introduced consolidated management of risk
control indicators, improved the frequency and quality of risk data reporting of the subsidiaries, as well
as promoted the full coverage of conglomerate risk management.
The Group has formulated policies and procedures to identify and evaluate major risks such as credit
risk, market risk and liquidity risk occurred in using financial instruments. The Group has strictly carried
out risk limits management and internal control processes, scientifically used quantitative model
for measurement, as well as carefully considered relevant limitations to perfect various professional
information management systems and risk data management to support the efficiency of the risk
management functions.
Organizational Structure of Risk Management
The Company makes standardized operations according to the Company Law, the Securities Law,
the Guidelines for Internal Control of Investment Banking Business of Securities Companies, the
Standards of Comprehensive Risk Management of Securities Companies and the Articles of Association.
Considering the needs of business development and risk management, the Company has built multi-
level organizational structure of risk management and determined specific responsibilities in risk
management for the board of directors, the board of supervisors, the management, the Chief Risk
Officer (“CRO”), the risk management department, the business and administration department,
branches and subsidiaries.
The board of directors makes and approves the strategic objectives of risk management. Its
responsibilities include the review and approval for the Company’s overall risk management objectives,
fundamental policies and major system, overall risk appetite and risk tolerance, as well as solutions
of significant risks; regular risk evaluation and reporting, supervision for the implementation of risk
management policies; appointment and assessment of the CRO; establishing the mechanism for direct
communication with the CRO, and other responsibilities stipulated in the Articles of Association. The
board of directors have set up the Compliance and Risk Management Committee to perform risk
management functions.
F-384
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 461
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Risk Management Policy and Organizational Structure (Continued)
Organizational Structure of Risk Management (Continued)
The board of supervisors supervises the Company’s risk management and internal control system.
Its responsibilities include supervisions on the risk management and internal control established and
implemented by the board of directors and management, as well as other responsibilities stipulated in
the Articles of Association.
Based on the approval of the board of directors, the management is required to set up an organizational
structure with clear responsibilities and processes, make risk management policies, rules and system,
carry out overall risk appetite and risk tolerance policies, identify and evaluate all kinds of risks,
effectively leverage the sound risk management system and mechanism, timely respond to defects and
issues, deliberate significant risk accidents, establish an overall performance evaluation system covering
risk management effectiveness, build a perfect IT system and data quality control mechanism, as well
as perform other risk management functions given by the board of directors.
The CRO appointed by the chairman of directors is the senior management who is responsible for
the overall risk management of the Company. The CRO is required to organize and implement risk
management policies, rules and system determined by the board of directors, arrange supervisions,
reviews and evaluations for risk management system established and perfected by the Company, arrange
supervisions and inspections for the implementation of risk management policies and procedures, make
suggestions and supervisions for improvements on issues in the risk management and regularly organize
evaluations for operations and the level of major risks, file the evaluation report to the management, the
board of directors and regulatory department, as well as organize the recommendation and assessment
for the person in charge of risk management in subsidiaries.
The risk management department led by the CRO performs risk management functions, which is
required to draft risk management policies, rules and system, supervise and guide other departments
to make the business risk management system and procedures, identify and evaluate major risks of
the Company’s businesses, organize supervisions and inspections for the implementation of the risk
management system of different businesses, regularly evaluate and report overall risk level and risk
management, as well as timely report significant potential risks or risk issues and give suggestions
accordingly. In addition, the compliance management department is responsible for the management
of compliance risk, money laundering risk and terrorist financing risk, the funds management head
office is responsible for the liquidity risk, the general manager office is responsible for the reputational
risk, and the IT management department is responsible for the IT risk.
The Company’s departments, branches and subsidiaries are responsible for the risk management
within the scope of their operation and management, establishing the sound risk management system
and procedures, accordingly, implementing risk management policies and completing related risk
management duties. The heads of the above departments, branches and subsidiaries assume direct
responsibilities of risk management effectiveness. The departments, branches and subsidiaries appoint
personnel to perform risk management functions in respective unit, including the supervision, inspection
and reporting for the implementation of risk management policies and system, as well front-line
management responsibilities.
F-385
462 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Risk Management Policy and Organizational Structure (Continued)
Organizational Structure of Risk Management (Continued)
The Company’s audit department carries out regular inspections for risk management and regular
evaluations for the effectiveness of the risk management system, and make suggestions for improvement
based on the evaluation result.
All subsidiaries operate in a risk standardized manner and operate in accordance with the law. The
Group has integrated the risk management of subsidiaries into the Group’s overall risk management
system, implemented vertical risk management, introduced consolidated management of risk control
indicators, integrated the T+1 risk data management, and further implemented the vertical risk
management for subsidiaries in terms of nomination of subsidiaries’ risk management principal, risk
limit and report, approval of major risk events, risk data docking, consolidated management of risk
control indicators, risk supervision and inspection, risk evaluation and assessment, etc.
Credit risk management
Credit risk refers to the risk that may cause losses for the Group ‘s operation due to the inability of
the debtor, counterparty or debt issuer to fulfil its agreed financial obligations or the deterioration of
its credit quality.
The currency funds are primarily deposited in state-owned commercial banks or joint-stock commercial
banks with good reputation. The clearing settlement funds are deposited in CSDC. The credit risk of
cash and cash equivalents is relatively low. The economic matter adopts full margin settlement to avoid
relevant credit risks.
The transactional financing business carried out by the Group mainly includes margin financing and
securities lending, stock-pledged repurchase, margin trading, and contractual repurchase securities
transactions. The Group mainly controls the credit risk of customers through due diligence, internal
rating, credit review, post-loan asset inspection, close a position, etc.
The Group emphasises the control of concentration risk through investment diversification, and mainly
favours the investment targets involving assets with high credit ratings. In credit risk management,
the Group closely tracks the operating conditions and changes in credit rating of investment targets,
implements the internal rating and unified credit management mechanisms, and establishes and improves
relevant credit risk monitoring indicators regarding issuer, industry and geographic concentration. In
post-investment management, the Group updates the debt issuer’s internal rating and credit limit in a
timely manner based on changes in financial indicators, major risk events and negative public opinion,
and dynamically adjusts the trading strategies.
In terms of financial leasing, the Group adopts a strategy of equal emphasis on industry and customer
to determine credit risk management policies. In terms of industry credit risk management, the Group
conducts dynamic tracking and assessment of the degree of prosperity of the industry in which the
financial leasing customer is located, formulates the corresponding industry delivery policy and controls
the risk of industry concentration on the basis of this. In terms of customer credit risk control, the
Group mainly controls the credit risk of customers through due diligence, internal rating, credit review,
post-loan asset inspection, risk early warning and monitoring, concentration limit control, etc.
F-386
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 463
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
For short-term interbank placement businesses such as bond repurchase, the Group carries out risk
control from the perspectives of counterparty selection and credit management, prudently selects
counterparties with good credit qualifications and secured securities with higher credit ratings, in an
effort to control the level of credit risk from the source. For OTC derivatives, the Group has established
sound management systems and procedures in terms of counterparty selection and credit management,
underlying securities management, risk response and disposal, etc., conducts daily marking-to-market
over the trading of OTC derivatives during the operating period, and manages counterparty credit risk
through strict implementation of measures such as netting settlement and performance guarantee.
The counterparties of the Group’s short-term interbank placements and OTC derivatives businesses are
mainly commercial banks, securities companies, asset management plans (AMPs) and other entities.
In handling such business, the Group chooses appropriate business models, strictly controls the
business scale and takes reasonable risk control measures. In addition, the Group pays attention to the
correlation between credit risk and market risk, and takes necessary monitoring and response measures
against credit risk in the context of market volatility, including but not limited to transaction margin
arrangements, counterparty internal rating and credit management, future potential risk exposure
measurement, wrong-way risk identification, etc.
The Group continues to improve its credit risk management system in accordance with industry
regulatory policies, capital market conditions and the Group’s business development strategies. During
the reporting period, with reference to relevant policies such as the credit risk management measures,
the Group fully implemented the credit risk identification, assessment, measurement, monitoring,
reporting and response work by customers and businesses. The first is to build the wisdom warning
centre of the group supported by cloud computing, blockchain, big data, artificial intelligence and other
financial technologies, implement the monitoring of public opinion fluctuation and default warning, the
risk analysis of financial reports and the management and control tools of high-risk customers, so as
to enable the business line and improve the abilities of risk early warning and forecasting. The second
is to further improve the credit risk management system of the counterparty in the bond investment
transaction and the underlying bond, upgrade the credit risk management information system
leveraged by the Group’s T+1 risk data market, and continue to improve the credit risk limit system in
the dimensions of asset quality, risk offsetting and concentration risk by enhancing risk identification,
measurement and stress testing capabilities. The third is to promote the unified rating and centralised
credit management mechanism, revise the detailed implement rules of asset wealth management client
credit risk rating and credit management and dynamically optimize the related models. The fourth is
to strengthen the systematic reporting procedures of credit business risk assets to effectively track and
monitor the Group’s overall credit risk profile and risk limit implementation. The fifth is to complete the
revision of ESG risk management measures and etc., establish and improve the mechanism of client ESG
risk accessing, tracking and monitoring, put the customer ESG due diligence and ESG risk assessment
into effect proactively. During the reporting period, the Group’s core credit risk monitoring indicators
were stable, and the overall credit risk was controllable.
F-387
464 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Measurement of ECL model
The Company divides the impairment into stages based on individual financial instrument or financial
instrument portfolio so as to effectively monitor the credit risks of the assets and makes adjustments on
regular basis. For different types of businesses, the Company establishes distinct criteria for each stage,
including but not limited to factors such as the obligor’s financial and operating situations, changes
in credit rating, collaterals and guarantees, significant negative public sentiment, judicial litigation and
overdue information etc., so as to comprehensively reveal business risk degree and dynamically reflect
reliability of the obligor’s performance, providing basis for division of impairment stages. The Company
categorizes the impairment of financial instruments into three stages:
(1) Stage I
The first stage includes financial instruments with low credit risk on the reporting date or
without significant increase in credit risk since initial recognition. The Company measures the
impairment provision according to the amount equivalent to the expected-credit-loss of the
financial instrument in the next 12 months (if the expected lifetime is less than 12 months, it
shall be within the lifetime).
(2) Stage II
The second stage includes financial instruments with significant increase in credit risk since initial
recognition but without credit impairment, i.e. there is no objective evidence indicating that
the financial instrument has become credit-impaired. The Company measures the impairment
provision according to the amount equivalent to the expected-credit-loss of the financial
instrument in the entire duration.
(3) Stage III
The third stage includes financial instruments that are credit impaired, the Company measures
the impairment provision according to the amount equivalent to the expected-credit-loss of the
financial instrument in the entire duration. Evidences that the financial instruments have become
credit-impaired include but not limited to the following observable events:
Significant financial difficulty of the obligor;
A breach of contract by the obligor, such as a default or overdue in interest or principal
payments over 90 (inclusive) calendar days;
It becomes probable that the obligor will enter bankruptcy or other financial reorganizations;
The disappearance of an active market for given financial assets because of financial
difficulties of the obligor;
F-388
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 465
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Measurement of ECL model (Continued)
(3) Stage III (Continued)
The obligor is obviously lack of or has lost solvency, being assigned with a manager by
the court or has started relevant legal proceedings;
The creditor, for economic or contractual reasons relating to the obligor’s financial
difficulty, granting a concession to the obligor that would not otherwise grant, including
but not limited to debt reduction and exemption, paying-a-debt-in-kind and debt-to-equity
swap;
The obligor has ceased operating activities, with business license cancelled or revoked by
the competent authority;
The obligor legally declared bankruptcy, shutdown, dismission and termination of legal
person qualification.
Credit impairment of the financial instruments may arise from combined effect of several events, and
may not necessary be arising from an individually identifiable event.
Criteria for judging a significant increase in credit risk
At the end of each reporting period, the Company assesses the financial instruments other than
accounts receivable regarding whether their credit risks have increased significantly since initial
recognition. The Company comprehensively assesses and considers credit risks based on nature of the
financial instruments and risk factors of the debtor. When assessing whether there has been a significant
increase in credit risk, the Company thinks it is necessary to consider the factors that include but are
not limited to:
The practical or anticipated significant downgrading of the internal credit risk rating of the obligor
since initial recognition, or significant decrease in the internal behavior score used for assessing
credit risk;
Upon initial recognition, downgrading of the obligor’s entity or debt rating above AA level
(inclusive) granted by the rating institution in mainland China, and the downgraded level is below
AA (exclusive); downgrading the obligor’s entity or debt rating above BBB-/Baa3 level (inclusive)
granted by the major three international rating institutions, and the downgraded level is below
BBB-/Baa3 (exclusive);
Upon initial recognition, downgrading of the obligor’s entity or debt rating below AA level
granted by the rating institution in mainland China; downgrading the obligor’s entity or debt
rating below BBB-/Baa3 level granted by the major three international rating institutions;
F-389
466 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Criteria for judging a significant increase in credit risk (Continued)
Obligor fails to make repayments as scheduled, including both failure to repay the principal and
the failure to repay the interest and debts under other items specified in the agreement in full
amount, and such situation has lasted for more than 30 (inclusive) calendar days;
Significant changes in the value of collateral or the guarantee provided by a third party, which
may weaken the debtor’s economic motive to repay within the prescribed period, or influence
the probability of default; for example, the decrease in value of pledged securities weakens the
obligor’s performance guarantee, to the extent that the obligor is unable to supplement collateral
within a reasonable period as agreed in the contract or the obligor has a stronger motivation to
default;
Anticipated significant changes with an adverse effect on the operation, finance or macroeconomic
condition that will cause significant changes to the obligor’s economic motive or ability to fulfil
obligations as stipulated in the contract;
Significant changes in the external market indicators for credit risk of specific financial instruments
or similar financial instruments with the same expected maturity; for example, the obligor’s credit
spread, credit default swap or other relevant market information;
The practical or anticipated significant changes in the quality of credit support provided by the
guarantor, which may weaken the obligor’s economic motive to repay within the prescribed
period; for example, if the guarantor stops providing financial support to obligor, the latter will
face bankruptcy or bankruptcy management, or make limited payment necessary for operation
(such as salary and payment to key suppliers) while giving a low priority to paying financial
liabilities, leading to increase in probability of default;
As for securitization, the practical or anticipated significant changes in their credit enhancement
or support quality may lead to decline in ability to absorb expected credit loss by the relevant
subordinated interest;
Other relative changes that can indicate the default risk of financial instruments before expected
maturity, instead of absolute changes in relation to default risk.
The Company finally concludes division of impairment stages of securities margin and stock pledged
repo business in accordance with collateral maintenance ratio of financing entity or contract and
complexity of disposing guarantee securities, and comprehensively considering factors such as operating
situations, repayment ability, litigation and overdue information of the financing entity at the end of
reporting period. For collateral maintenance ratio, the Company sets up different preliminary margin
call thresholds and forced liquidation thresholds for different financing entities or contracts in line with
credit status of the financing entities at transactions, module to which the guarantee securities belong,
liquidity and trade restriction. The preliminary margin call threshold ranges from 150% to 170% and the
forced liquidation threshold ranges from 130% to 150%. At the stage of impairment assessment, for
purpose of prudently assessing risks of disposing collateralized securities, the Company determines over
loss alert threshold for different financing entities or contracts according to the complexity of disposing
guarantee securities. The over loss alert threshold ranges from 110% to the forced liquidation threshold.
F-390
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 467
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Criteria for judging a significant increase in credit risk (Continued)
That the collateral maintenance ratio is above or equal to the preliminary margin call threshold
is classified into “Stage I”;
That the collateral maintenance ratio is between the preliminary margin call threshold and the
over loss alert threshold, or satisfying conditions of “significant increase in credit risk” is classified
into “Stage II”’;
That the collateral maintenance ratio is below the over loss alert threshold, or that evidence of
“credit-impaired” is existed is classified into “Stage III”.
Parameters and valuation technique of ECL measurement
The key inputs used by the Company to measure expected credit loss are listed as follows:
Probability of Default (PD);
Loss Given Default (LGD);
Exposure at Default (EAD).
As mentioned above, key parameters usually come from the Company’s internally developed risk
measurement model and other historical data, and adjustments are made to reflect the forward-looking
information of probability weights.
PD refers to estimated value of the likelihood that default will occur within certain period, which is
estimated at a certain time point. LGD refers to estimated value of loss resulting from default, which is
based on the gap between due contractual cash flows and the Company’s expected amount received,
with the consideration of collateral’s expected future cash flows receivable. EAD refers to estimated
value of risk exposure at the date of default in the future, with the consideration of anticipated changes
in risk exposure after the reporting date, such as repayment of principal and interest, and anticipated
loans withdrawn from financing agreements.
The Company uses the ECL model based on three key risk indicators (PD, LGD and EAD) to measure
impairment provision for financial instruments at Stage I and Stage II. The product of these three
indicators is the ECL of the financial instrument. PD is measured by internal or external credit ratings
or at the migration rate or rolling rate calculated based on historical internal data after adjusting
forward-looking information. When assessing LGD, the Company calculates the recoverable cash flows
of guarantee securities after taking into account of the expected disposal cycle of collateralized securities
and impact of value fluctuation within the expected disposal cycle (including factors such as disposable
amount of collateralized securities, daily average trading volume, restrictions against circulation, rules
for shareholding reduction and historical volatility) as well as relevant taxes. EAD reflects unpaid amount
when presuming a default of various financial instruments during corresponding measurement period.
F-391
468 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Parameters and valuation technique of ECL measurement (Continued)
For the financial instruments at Stage III, the Company assesses the ECL using individually impairment
assessment method. Specifically, the Company reasonably assesses cash realizable value of disposing
collateralized securities based on specific risks of individual item and adequate considerations about
financial status and operating as a going concern of the obligor and the underlying listed company of
collateralized securities, judicial litigation, restrictions against shareholding reduction, significant negative
public sentiment and delisting risk. Meanwhile, the Company comprehensively judges the obligor’s
expected recoverable cash flow in line with valuation of other supplemental credit enhancement assets
provided by the obligor, the portion that cannot cover its risk exposure after discounting would be
included in impairment provision.
Forward-looking Information
The assessment of significant increase in credit risk (SICR) and the calculation of expected credit losses
(ECL) involve forward-looking information.
For bond investment financial assets, the Company qualitatively selects key economic indicators as
forward-looking factors, and identifies key economic indicators that affect credit risk and ECL, including
the year-on-year growth rate of broad money supply (M2), gross domestic product (GDP), producer price
index (PPI), and total retail sales of consumer goods. For financing financial assets, the probability of
default (PD) is estimated using the regression analysis method to establish a correlation model between
PD and macroeconomic indicators, which will be used in combination with the forecast macroeconomic
indicators to infer PD changes. Macroeconomic indicators include, but are not limited to, gross domestic
product (GDP) growth rate, broad money supply (M2) growth rate, producer price index (PPI) growth
rate, and consumer price index (CPI) growth rate, etc. By building relationship between these economic
indicators and business risk characteristics, forward-looking adjustments are finally made to ECL of
financing financial assets.
In addition to the benchmark economic scenarios, the Company’s management also provides other
possible scenarios and corresponding weights taking into account the market expectations. The
Company sets different scenarios based on the risk characteristics of main businesses or product
categories to reasonably evaluate the possible changes in risks of relevant financial assets under different
economic scenarios. The Company reassesses the number of scenarios and their characteristics on each
balance sheet date.
The Company believes that, for the Company’s credit financial asset portfolio, three different scenarios
(“Optimistic”, “Benchmark” and “Pessimistic”) should be considered to reasonably reflect the possible
impact of selected economic indicators on ECL. The Company determines the weight of each scenario
based on statistical analysis and expert judgement, also considering the range of possible outcomes
represented by each scenario. Currently, the weight of the benchmark scenario used by the Company
exceeds the sum of the weights of other scenarios.
F-392
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 469
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk management (Continued)
Forward-looking Information (Continued)
The Company measures the related provision for loss by weighted 12-month ECL (Stage 1) or weighted
lifetime ECL (Stage 2 and Stage 3). The above weighted ECL is calculated by multiplying the ECL under
each scenario by the weight of the corresponding scenario.
Similar to other economic estimates, the forecast economic indicators and probability of occurrence are
inherently highly uncertain. As a result, the actual results may be materially different from the estimates.
The Company believes that these forecasts reflect the Company’s best estimate of possible outcomes.
Sensitivity analysis
The ECL measurement model will use model parameters, macroeconomic variables for forward-
looking forecast, the weights of economic scenarios, and other factors considered when applying
expert judgement. Changes in these parameters, assumptions and judgements will have an impact
on the measurement of SICR and ECL. The Company regularly re-examines the model every year and
appropriately revises the assumptions and parameters used in the model according to the specific
circumstances. The adjustment of the model and parameters this year has no significant impact on the
ECL results.
The Company conducted a sensitivity analysis on the economic indicators used in forward-looking
measurement, which showed that when the weights of the optimistic and pessimistic scenarios changed
by 10%, the impact on the provision for ECL made by the Company would not be significant.
At the same time, the Company also conducted a sensitivity analysis on the stage classification of credit
risk. As of 31 December 2022, assuming that there was no SICR since the initial recognition that might
lead to transfer of all the financial instruments in Stage 2 to Stage 1, the impact on the ECL recognised
in the balance sheet would not be significant.
Collateral and other credit enhancements
The Company adopts a series of policies and credit enhancements to lower credit risk exposure to
acceptable levels. Among them, the most common method is to provide collateral or guarantee. The
amount and type of collateral required depend on an assessment on the credit risk of the counterparty.
The collaterals under the financing and repurchase agreements are mainly stocks, bonds and funds.
The Company regularly monitors the market value of the collateral, requests additional collateral when
needed according to the contract, and monitors changes in the market value of the collateral when
reviewing the adequacy of loss provision.
F-393
470 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Collateral and other credit enhancements (Continued)
Management of Impairment of Financial Instruments
To ensure the validity of preparing for impairment of financial instruments, the Company has established
a range of policies and processes that are in line with credit risk management objectives for financial
instruments. The Company has established a counter-balanced and collaborative working mechanism
among business departments, risk management departments and finance departments, and has clarified
department responsibilities, so as to measure credit risk of financial instruments and prepare for credit
impairment in a prompt, accurate and reasonable manner. The Company’s management and authorized
agency manage its impairment of financial instruments through the following measures:
Establish a credit risk management framework with clarified rights and liabilities and a complete
system based on corporate strategy and risk appetite, and make adjustments promptly;
Organize and improve assessment on impairment of financial instruments at the balance sheet
date, and ensure that the validation, development and maintenance of the impairment model is
effectively guaranteed;
Assess impairment of the Company’s financial instruments and potential financial impact, and
report to the Board of Directors promptly;
Review the Company’s decisions on major impairment events;
Establish integrated information system and data quality control mechanism for impairment of
financial instruments;
Other credit risk management responsibilities promised by the Board of Directors.
During the reporting period, based on the Policy for the Management of Impairment of Financial
Instruments of Haitong Securities Co., Ltd. and related management regulations, the Company
standardized the treatment of impairment of financial instruments, strengthened the management
of collateral for financing businesses, and promoted collaborative cooperation among relevant
departments. At the same time, the company kept optimizing the ECL model for the provision of credit
impairment to ensure its stability and sensitivity. The measurement of ECL can dynamically describe
the change of the obligor’s credit qualification, the fluctuation of market conditions, the impact of
macro-economic changes and other factors. The implementation of relevant policies and processes for
the management of impairment of financial instruments was kept in place, which provides a guarantee
for the reasonableness and timeliness of the Company’s provision for credit impairment.
F-394
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 471
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Collateral and other credit enhancements (Continued)
Management of Impairment of Financial Instruments (Continued)
Without taking into account available collateral or other credit enhancements, the amounts representing
the Group’s maximum credit risk exposure at the balance sheet date are as follows:
2022/12/31 2021/12/31
Advances to customers on margin financing 67,843,871 75,223,404
Accounts receivable 10,394,515 11,372,016
Other receivables 8,223,597 6,038,830
Other loan and receivables 6,728,168 14,938,665
Debt instruments measured at amortised cost 5,806,157 4,725,209
Finance lease receivables 19,458,453 33,472,587
Receivables arising from sale and leaseback arrangements 84,549,952 55,088,023
Debt instruments at fair value through other comprehensive income 52,851,899 37,052,945
Financial assets held under resale agreements 32,645,149 39,761,017
Placements to banks and other financial institutions 274,445 352,928
Financial assets at fair value through profit or loss 108,626,776 121,179,766
Deposits with exchanges 22,864,574 17,655,168
Clearing settlement funds 21,380,695 16,765,418
Bank balances and cash 153,392,719 156,448,163
Restricted bank balances and cash 1,769,482 1,503,454
Deposits with central banks 3,245,096 3,304,209
Deposits with other banks 172,872 226,337
Loans and advances 5,869,014 4,712,651
Derivative financial assets 1,477,167 1,084,731
Maximum credit exposure 607,574,601 600,905,521
Off balance sheet items credit exposure
Guarantee granted 1,070,625 963,048
Irrevocable commitments 1,220,027 1,824,989
Maximum off balance sheet items credit exposure 2,290,652 2,788,037
F-395
472 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management
Market risk mainly refers to the risk of loss in the business related to self-owned capital investment due
to unfavourable changes in market prices (stock prices, interest rates, exchange rates, and commodity
prices etc.) during the Group’s business activities.
The Group uses the value at risk (VaR) method to assess and analyses the market risk of various
investment financial instruments and positions. The measurement standard includes the self-owned
investment portfolio held for trading of the Group. The VAR model used by the Group has a 95%
confidence level and the target period is the next trading day. The details are as follows:
VaR 95% in 2022
Value at
risk of the Value at
Company/ risk of the
Value at Value at Net assets Group/
risk of the risk of of the Net assets
Item Company the Group Company of the Group
Maximum month-end value in the
Reporting Period 326,792 374,868 0.22% 0.20%
Minimum month-end value in the
Reporting Period 166,662 223,846 0.11% 0.13%
Average month-end value in the
Reporting Period 255,465 297,171 0.17% 0.17%
Year-end value in 2022 174,182 233,172 0.12% 0.13%
VaR 95% in 2021
Value at
risk of the Value at
Company/ risk of the
Value at Value at Net assets Group/
risk of risk of of the Net assets
Item the Company the Group Company of the Group
Maximum month-end value in the
Reporting Period 308,906 378,932 0.22% 0.22%
Minimum month-end value in the
Reporting Period 154,452 267,406 0.11% 0.16%
Average month-end value in the
Reporting Period 264,445 341,430 0.19% 0.20%
Year-end value in 2021 246,569 280,569 0.17% 0.16%
F-396
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 473
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management (Continued)
During the Reporting Period, the ratio of the Company’s risk value to the Company’s net assets at the
end of each month and the ratio of the parent company and the Group’s main subsidiaries’ risk value
to the Group’s net assets were always within 0.3%, and the market risk was controllable and bearable.
The analysis of the VaR classified by risk types are as follows:
The Group The Company
Item 2022/12/31 2021/12/31 2022/12/31 2021/12/31
Equity VaR 221,967 297,054 180,146 259,054
Interest rate VaR 96,362 102,385 94,203 100,385
Commodity VaR 11,598 81 2,491 1,081
Exchange rate VaR 26,552 8,342 6,908 3,342
Overall portfolio VaR 233,172 280,569 174,182 246,569
The Company
2022 2021
Item Average Maximum Minimum Average Maximum Minimum
Equity VaR 234,740 310,747 180,146 278,312 330,670 161,253
Interest rate VaR 84,243 102,197 73,410 86,858 109,531 54,109
Commodity VaR 2,538 9,581 – 2,757 6,328 493
Exchange rate VaR 3,668 6,908 2,921 7,469 11,324 3,342
Overall portfolio VaR 255,465 326,792 166,662 262,877 308,906 154,452
F-397
474 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management (Continued)
Stock price risk
Stock price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
as a result of changes in market prices (other than those arising from interest rate risk or foreign
exchange risk), whether caused by factors specific to an individual investment, its issuer, or all factors
affecting equity instruments traded in the market.
The stock price risk with great uncertainty is one of the types of market risk that the Group is mainly
faced with. The Group pays close attention to the price movement of related assets, and take related
measures to prevent it by daily tracking, monitoring and controlling the investment scale of security
position and the movement of VaR. The investment scale of varieties of securities is properly controlled
and timely adjusted with the diversified investment strategy by the Group. Meanwhile, the market risk
is effectively controlled with hedging instruments.
The Group’s stock price risk arises from equity investments in financial assets that are classified as
held-for-trading or designated as financial assets at fair value through other comprehensive income
(FVTOCI). The Board of Directors closely monitors investment portfolios to manage risk exposures, and
has hedged risks by entering into derivatives contracts.
The Group manages and analyses stock price risk based on the impact of securities price fluctuations
on net profit and OCI during the reporting period. When reporting risk internally to key management
personnel, management estimates a reasonable potential price change of 10%. With all other variables
being held constant, if the market price of relevant equity assets rises or falls by 10%, the impact on
the Group’s net profit and OCI will be as follows:
2022 2021
Profit for the year
Increase by 10% 1,364,778 1,821,722
Decrease by 10% (1,364,778) (1,821,722)
Revaluation reserve
Increase by 10% 382,612 739,356
Decrease by 10% (382,612) (739,356)
In the management’s opinion, the sensitivity analysis is unrepresentative of inherent price risk as the
year end exposure does not reflect the exposure during the year.
F-398
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 475
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management (Continued)
Interest rate risk
Interest rate risk refers to the risk caused by changes in the market yield curve or credit spread and
other factors. The businesses that carry such risk mainly include bond investments and interest rate
derivatives. The Group’s control of interest rate risk is mainly realised by scale control and investment
portfolios to achieve reasonable asset allocation, matching the term structures of liabilities and assets,
and measuring interest rate risk by regularly measuring investment portfolio duration, convexity, DV01
and other indicators.
The Group uses sensitivity analysis to measure the possible impact (after tax) of changes in interest
rates on the Company’s net interest income and gains and losses on changes in fair value and equity.
The sensitivity of net interest income refers to the impact on the net interest income arising from the
impact of certain interest rate changes on the financial assets and liabilities held at the end of the
period that are expected to be subject to an interest rate resetting within one year. The calculation of
the sensitivity of gains and losses on changes in fair value and the sensitivity of equity is based on the
impact of the revaluation of the fixed-rate financial assets held at the end of the period as financial
assets held for trading and other debt investments in response to certain interest rates changes.
If the market interest rate rises or falls 25 basis points while other variables are held constant, the
impacts on the Group’s net profit and other comprehensive income are as follows:
2022 2021
Profit after income tax for the year
Increase by 25bps (198,458) (245,317)
Decrease by 25bps 203,460 253,012
Other comprehensive income after income tax
Increase by 25bps (197,516) (175,770)
Decrease by 25bps 199,520 177,764
Some financial asset and financial liability contracts in the Group are pegged to the benchmark interest
rate. On 31 December 2022, the financial asset contracts whose book value is 1.25 billion RMB are
pegged to HIBOR, and the financial asset contracts whose book value is 0.26 billion RMB are pegged
to LIBOR. The financial liability contracts whose book value is 27.39 billion RMB are pegged to HIBOR,.
and the financial liability contracts whose book value is 4.13 billion RMB are pegged to LIBOR. As at
31 December 2022, the above contracts have not completed the replacement of reference benchmark
interest rate yet.
F-399
476 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk management (Continued)
Exchange-rate risk
Exchange rate risk refers to the risk resulted from changes in exchange rate. During the reporting period,
with constant improvement of worldwide layout, facing the complicated and changing international
market, the Group took the initiative to lower the asset leverage, reduced the overall scale of assets
dominated in foreign currencies, resulting in a effectively controlled risk exposure of exchange rate.
The Group constantly keeps track of and studies foreign exchange market, makes effort in continuing
improvement of system development and internal management, and hedges and mitigates exchange
rate risk through a series of measures such as hedging. The Group puts priority on the match between
assets and liabilities denominated in foreign currencies to narrow the exposure of foreign exchange
risk, and mitigate the impact of foreign exchange exposure on operating results through net investment
hedging for overseas operations. If RMB is strengthened or weakened by 5% against other foreign
currencies while other variables are held constant, the net profit of the Group will increase or decrease
by RMB303 million in 2022 (2021: RMB512 million).
Commodity price risk
Commodity price risk arises from adverse fluctuation of commodity prices. During the reporting period,
the commodity market risk exposure of the Group is relatively low. The Group has managed risk
exposures effectively mainly by hedging risks through commodity futures, options and other derivatives.
Liquidity risk management
Liquidity risk is the risk to a company’s inability to timely receive sufficient funds from reasonable costs
thus it can’t pay matured debts, fulfil other payable obligations, or meet regular business operation
needs. Macro policies, market changes, operation condition, customer credit, as well as unmatched
asset and liability structure may cause liquidity risk.
In terms of daily liquidity risk management, the Company, in accordance with the requirements of
liquidity risk preference and risk indicator limits, keeps the liquidity risk detectable, controllable and
acceptable, and reserves sufficient high quality liquid assets pursuant to management requirements,
enabling the smooth operation of the Company’s business and the repayment of due liabilities. The
Company carries out ongoing daily liquidity and risk indicators management, and, in combination with
the status of assets and liabilities, develops a fund and indicators interconnected system to improve
the framework for liquidity risk analysis including the follow-up of the daily indicators and position,
prospective analysis of monthly indicators and the breakdown of department indicators, which enrich
the liquidity risk management in different periods and enhance the Company’s efficiency in management
and forecasting of liquidity risk.
F-400
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 477
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk management (Continued)
Regarding the medium and long-term liquidity risk management, the Company makes continuous effort
on the improvement of asset allocation structure. More analysis is conducted for the development
trend of assets and liabilities to control liquidity risks at root. First, the Company establishes the
Asset-liability Allocation Committee to carry out asset-liability management work. Through the timely
analysis of business development trend and potential medium and long-term cash requirements, the
liability maturity structure is adjusted to enable the reasonable matching between the term and scale
of assets and that of liabilities. Second, the Company makes continuous effort on the improvement
of fine management of liquidity, so that the liability structure and the maturity are more reasonable,
maintaining the balance of the assets on safety, liquidity and profitability. During the reporting
period, the Company attached importance to its relationship with commercial banks, gave priority to
standardised operation, and maintained a good reputation while having its financing channel smoothed.
In respect of the management on the group level, the Company has promoted relative requirements
on group and subsidiaries. Firstly, the Company has continued to group management of subsidiaries
from two perspectives of risks, and assets and liabilities management, and make requirements based
on three dimensions, organization system assurance, risk management and control frame, and risk
responses to assist subsidiaries to complete their management system. Secondly, the Company has
formulated quota requirements for subsidiaries, in line with the differences of industries, regions, and
risk features among subsidiaries, based on the liquidity risk consolidated financial statement, in order
to monitor their real situation of liquidity risk efficiently. It is also attributable to transmit liquidity risk
preferences downwards. Lastly, the Company has formulated Support and Manage Method of Group’s
liquidity, for the purpose of reinforcing our capability of disposing liquidity risks and highlighting
group’s advantages in managing, adjusting, and controlling information. It is regarded as the overall
management policy, which initially established the support system of Group’s liquidity, clarifying the
management goals, management principles, labour divisions and responsibilities, and support channels.
All in all, the Company has strived to avoid any liquidity risks from happening within the Group.
F-401
478 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk management (Continued)
The table below lists the cash flows payable upon the maturity of the financial liabilities held by the
Group for the liquidity risk management purpose. The amounts showed in the table are undiscounted
contractual cash flows with principal and interest included.
As at 31 December 2022
Less than 3 months 1 year 5 years
On Demand 3 months to 1 year to 5 years and above Total
Borrowings – 31,542,905 26,617,410 34,353,563 986,978 93,500,856
Deposits from central bank – 2,156,079 – 83,658 – 2,239,737
Customer accounts 446,899 1,390,002 2,352,645 1,702,547 – 5,892,093
Accounts payable to brokerage clients 115,513,463 – – – – 115,513,463
Placements from other financial institutions – 3,054,040 330,321 3,568,682 350,761 7,303,804
Financial assets sold under repurchase
agreements 3,025,125 92,426,020 6,374,233 – – 101,825,378
Other payables and accruals 5,146,349 2,677,389 11,717,365 454,147 148,819 20,144,069
Short-term financing bills payables – 6,163,976 10,118,436 – – 16,282,412
Bonds payable – 14,473,004 50,396,068 126,709,408 374,499 191,952,979
Financial liabilities at fair value through
profit or loss 3,348,439 926,134 1,203,785 17,407,933 2,189 22,888,480
Derivative financial liabilities 133,962 287,929 185,420 134,485 156,623 898,419
Long-term payables – – – 5,003,648 504,516 5,508,164
Lease liabilities 118 83,794 230,044 549,700 271,136 1,134,792
127,614,355 155,181,272 109,525,727 189,967,771 2,795,521 585,084,646
F-402
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 479
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk management (Continued)
As at 31 December 2021
Less than 3 months 1 year 5 years
On Demand 3 months to 1 year to 5 years and above Total
Borrowings – 28,399,210 21,328,380 31,420,830 596,530 81,744,950
Deposits from central bank – – 158,833 2,163,306 – 2,322,139
Deposits from other banks – – 81,771 – – 81,771
Customer accounts 368,601 1,008,996 1,393,839 3,201,654 – 5,973,090
Accounts payable to brokerage clients 123,202,200 – – – – 123,202,200
Placements from other financial institutions 50 3,641,990 12,792,500 3,051,640 418,340 19,904,520
Financial assets sold under repurchase
agreements 1,608,850 83,854,300 6,560,100 4,500 – 92,027,750
Other payables and accruals 8,472,129 3,546,604 9,206,567 289,053 306,041 21,820,394
Short-term financing bills payables – 7,497,570 17,697,020 5,180 – 25,199,770
Bonds payable – 12,530,850 43,147,340 115,296,610 7,631,490 178,606,290
Financial liabilities at fair value through
profit or loss 5,967,370 639,910 3,848,830 5,716,281 143,831 16,316,222
Derivative financial liabilities – 239,210 597,860 408,260 302,990 1,548,320
Long-term payables – – – 5,890,096 340,248 6,230,344
Lease liabilities 50 95,080 217,100 546,160 296,570 1,154,960
139,619,250 141,453,720 117,030,140 167,993,570 10,036,040 576,132,720
Capital risk management
Complying with the requirements of Administrative Measures for Risk Control Indicators of Securities
Companies, the Company has compiled regulatory statements and monitored risk indicators such as
net capital on a daily basis. The Company timely monitors and controls businesses and factors that
would influences net capital and risk control indicators to meet compliance requirements. The quality
of group’s overall asset is fine, capital adequacy ratio is high, and risk endurance is strong. Each risk
control indicator complies with relative regulations.
F-403
480 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Capital risk management (Continued)
In accordance with the relevant regulations issued by China Securities Regulatory Commission, the
Company is required to meet the following standards for risk control indicators on a continual basis:
The ratio between its net capital and the sum of its various risk capital provisions shall be no less
than 100% (“Ratio 1”);
The ratio between its net capital and its net assets shall be no less than 20% (“Ratio 2”);
The ratio between its net capital and its liabilities shall be no less than 8% (“Ratio 3”);
The ratio between its net assets and its liabilities shall be no less than 10% (“Ratio 4”);
The ratio between the value of equity securities and equity related derivatives held and its net
capital shall not exceed 100% (“Ratio 5”);
The ratio between the value of non-equity securities held, non-equity related derivatives and net
capital shall not exceed 500% (“Ratio 6”);
The ratio between its core net capital and total assets of in-balance-sheet and off-balance-sheet
shall be no less than 8% (“Ratio 7”);
The ratio between its high quality liquid assets and net cash outflow in 30 days shall be no less
than 100% (“Ratio 8”); and
The ratio between its available stable funding and stable funding needed shall be no less than
100% (“Ratio 9”).
F-404
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 481
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Capital risk management (Continued)
The net capital of a securities company is composed of core net capital and subsidiary net capital.
Core Net Capital = Net Assets
– Risk Adjustment for Asset Items
– Risk Adjustments with Liabilities
-/+Other Adjustments Identified or Approved by the CSRC.
Subsidiary net capital = Long-term subordinated
× set ratio
-/+ other adjustment items identified or approved by the CSRC.
Major Risk Control Indicators
31 December
Risk control indicator 2022
Net capital 93,818,678
Ratio 1 241.25%
Ratio 2 62.95%
Ratio 3 36.97%
Ratio 4 58.74%
Ratio 5 16.59%
Ratio 6 193.66%
Ratio 7 21.12%
Ratio 8 293.75%
Ratio 9 162.85%
The above ratios are calculated based on the underlying financial information prepared in accordance
with the relevant accounting rules and financial regulations applicable to enterprises in the People’s
Republic of China regulated by the CSRC.
Certain subsidiaries of the Group are also subject to capital requirements under relevant regulations
in PRC, Hong Kong and other jurisdictions. The capital of the Group mainly comprises its total equity.
The Company attaches vital importance to the influences caused by the significant events such as
dividend distribution, significant investment, and innovation business on risk control indicators. The
Company makes sensitivity analysis or pressure test on risk control indicators such as net capital prior
to implementing above events, and only when complying with regulations of risk control indicator will
the Company implement such events.
Additionally, the Company conducts outlook on future operation plan every half year, in which
the Company considers the conditions of maximum operation scale and negative reverse of market
condition, to ascertain every future indicator comply with relative regulations.
During the reporting period, the Company did not have any risk control indicator such as net capital
that exceeded regulatory standards.
F-405
482 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities
Some of the Group’s financial assets and liabilities are measured at fair value for financial reporting
purposes. The board of directors of the Group has set up certain process to determine the appropriate
valuation techniques and inputs for fair value measurements. The appropriateness of the process and
the determination of fair value are reviewed by the board of directors periodically.
The fair value of financial assets and financial liabilities are determined as follows:
The fair value of financial assets with standard terms and conditions and traded in active liquid
markets are determined with reference to quoted market bid prices;
The fair value of derivative instruments is calculated using quoted prices. Where such prices are
not available, fair value is determined by discounted cash flow analysis using the applicable yield
curve for the duration of the instruments for non-optional derivatives, and option pricing models
for optional derivatives;
The fair value of other financial assets and financial liabilities (excluding those described above)
is determined in accordance with generally accepted pricing models based on discounted cash
flow analysis, market comparison approach, etc.
The Group uses valuation techniques to determine the fair value of financial instruments when it is
unable to obtain the open market quotation in active markets.
The main parameters used in valuation techniques for financial instruments held by the Group include
bond prices, interest rates, foreign exchange rates, equity and stocks prices, volatilities, correlations,
early repayment rates, counterparty credit spreads and others, which are all observable and obtainable
from open market.
Management determines the fair value of the Group’s level 3 financial instruments using a variety of
techniques, including examining correlations of these fair values with macro-economic factors, engaging
external values, and using valuation models that incorporate unobservable inputs such as loss coverage
ratios. The fair value measurement of these instruments will not change significantly if changing one or
more of the unobservable inputs to reflect reasonably possible alternative assumptions. The Group has
established internal control procedures to control the Group’s exposure to such financial instruments.
F-406
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 483
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Financial instruments not measured at fair value
The table below summarises the carrying amounts and expected fair values with obvious variances of
those financial assets and liabilities not presented on the Group’s consolidated statement of financial
position at their fair values
As at 31 December 2022 As at 31 December 2021
Carrying Carrying
amount Fair value amount Fair value
Financial assets
Debt instruments at amortised cost 5,806,157 5,546,901 4,725,209 4,310,574
Financial liabilities
Non-convertible bonds payable 181,830,918 182,341,774 163,586,070 170,269,519
The fair values of the financial assets and financial liabilities included in the level 2 categories above
have been determined in accordance with generally accepted pricing models based on a discounted
cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk
of counterparties.
Except for the above, the directors of the Company consider that the carrying amounts of financial
assets and financial liabilities recorded at amortised cost in the Group’s statements of financial position
approximate their fair values.
Financial instruments measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3.
For Level 1 financial instruments, fair values are unadjusted quotes in active markets for identical assets.
For Level 2 financial instruments, valuations are generally calculated based on the fair value of the
underlying investments which are debt securities or publicly traded equity instruments in each portfolio
or obtained from third party pricing services agent such as China Central Depository & Clearing Co.,
Ltd. which are based on the discounted cash flow models, recent transaction prices or other valuation
techniques in which all significant inputs are directly or indirectly observable from market data.
For Level 3 financial instruments, the management obtains valuation quotations from counterparties
or uses valuation techniques to determine the fair value, including discounted cash flow analysis, net
asset value, market comparison approach and option pricing model, etc. The fair value of these financial
instruments may be based on unobservable inputs which may have significant impact on the valuation
of these financial instruments, and therefore, these assets and liabilities have been classified by the
Group as level 3. The unobservable inputs which may have impact on the valuation include weighted
average cost of capital, liquidity discount, price to book ratio, etc.
F-407
484 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Financial instruments measured at fair value on a recurring basis (Continued)
The following table presents financial assets and financial liabilities measured at fair value as at 31
December 2022 and 31 December 2021.
Level 1 Level 2 Level 3 Total
As at 31 December 2022
Financial assets at fair value through
profit or loss
– Debt securities 1,357,059 92,234,054 8,043,192 101,634,305
– Equity securities 11,227,920 640,956 18,475,101 30,343,977
– Funds 3,480,911 41,501,759 13,871,281 58,853,951
– Others – 12,983,497 5,782,999 18,766,496
Debt instruments at fair value
through other comprehensive
income 901,956 51,107,051 842,892 52,851,899
Equity instruments at fair value
through other comprehensive
income 5,101,492 – 994,827 6,096,319
Derivative financial assets 44,366 646,636 786,165 1,477,167
22,113,704 199,113,953 48,796,457 270,024,114
Financial liabilities at fair value
through profit or loss
– Financial liabilities held for
trading 164,914 121,783 – 286,697
– Designated as financial
liabilities at fair value
through profit or loss 601,363 3,136,206 18,864,214 22,601,783
Derivative financial liabilities – 535,107 363,312 898,419
766,277 3,793,096 19,227,526 23,786,899
F-408
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 485
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Financial instruments measured at fair value on a recurring basis (Continued)
Level 1 Level 2 Level 3 Total
As at 31 December 2021
Financial assets at fair value through
profit or loss
– Debt securities 698,881 110,654,910 5,731,526 117,085,317
– Equity securities 15,103,142 579,055 19,272,727 34,954,924
– Funds 3,261,745 42,982,623 2,381,450 48,625,818
– Others – 16,473,762 3,269,928 19,743,690
Debt instruments at fair value
through other comprehensive
income 927,858 34,837,660 1,287,427 37,052,945
Equity instruments at fair value
through other comprehensive
income 9,858,079 – 388,792 10,246,871
Derivative financial assets 59,072 735,177 290,482 1,084,731
29,908,777 206,263,187 32,622,332 268,794,296
Financial liabilities at fair value
through profit or loss
– Financial liabilities held for
trading 425,338 1,957,132 – 2,382,470
– Designated as financial
liabilities at fair value
through profit or loss – 13,488,046 445,701 13,933,747
Derivative financial liabilities 44,520 884,578 619,218 1,548,316
469,858 16,329,756 1,064,919 17,864,533
F-409
486 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Reconciliation of Level 3 fair value measurements of financial assets and financial liabilities
31 December 2022
Financial assets Financial
at fair value Equity Debt liabilities at fair
through instruments instruments value through Derivative
profit or loss at FVTOCI at FVTOCI profit or loss instruments
As at 31 December 2021 and
1 January 2022 30,655,631 388,792 1,287,427 445,701 (328,736)
Transfer in 17,740,117 – – 437,844 538
Purchase/(Disposal) 4,503,120 894,031 (522,110) 17,465,797 (1,114,928)
Transfer out (6,394,652) – (6,200) – –
Other losses and gains (331,643) (287,996) 83,775 514,872 1,865,979
As at 31 December 2022 46,172,573 994,827 842,892 18,864,214 422,853
31 December 2021
Financial assets Financial
at fair value Equity Debt liabilities at fair
through instruments instruments value through Derivative
profit or loss at FVTOCI at FVTOCI profit or loss instruments
As at 31 December 2020 and
1 January 2021 26,158,747 267,042 3,099,639 331,830 (13,595)
Transfer in 3,205,928 – – 956,179 140
Purchase/(Disposal) 2,397,401 490 (2,322,403) 31,720 –
Transfer out (3,111,053) – (27,393) (324,149) –
Other gains and losses 2,004,608 121,260 537,584 (549,879) (315,281)
As at 31 December 2021 30,655,631 388,792 1,287,427 445,701 (328,736)
In 2022 and 2021, the amounts of financial instruments measured at fair value transferred between
level 1 and level 2 were not significant.
F-410
HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share) 487
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
76. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value of financial assets and liabilities (Continued)
Reconciliation of Level 3 fair value measurements of financial assets and financial liabilities
(Continued)
In 2022, the Group transferred a portion of its equity investment from level 3 to level 1 mainly due to
its lifting of restricted stocks and its fair value is determined based on active market quotes without
liquidity discount adjustment. In addition, the Group has moved some financial instruments into level
3 as the technical valuation method for these instruments has changed to one based on significant
unobtainable inputs. No other significant transfer of the Group’s financial instruments measured at fair
value between level 1, level 2 and level 3 occurred in 2022 (2021: same).
77. TRANSFER OF FINANCIAL ASSETS
Asset-backed securities
The Group enters into securitization transactions in the normal course of business by which it transfers
advances to customers on finance lease receivables and receivables arising from sale and leaseback
arrangements to structured entities which issue asset-backed securities to investors. As the Group holds
all the junior tranches asset-backed securities, substantially all the risks and rewards of ownership of
the transferred assets are retained, so the Group continues to recognise the transferred asset in its
entirety and recognises bonds payable for the consideration received.
As at 31 December 2022, the carrying amount of finance lease receivables and receivables arising from
sale and leaseback arrangements that have been transferred but not derecognised was RMB10,149
million (31 December 2021: RMB9,338 million).
Asset-backed notes
The Group enters into securitization transactions in the normal course of business by which it transfers
finance lease receivables and receivables arising from sale and leaseback arrangements to structured
entities which issue asset-backed notes in China Inter-bank market to investors. As the Group holds
all the junior tranches asset-backed notes, substantially all the risks and rewards of ownership of the
transferred assets are retained, so the Group continues to recognise the transferred asset in its entirety
and recognises bonds payable for the consideration received.
As at 31 December 2022, the carrying amount of finance lease receivables and receivables arising from
sale and leaseback arrangements that have been transferred but not derecognised was RMB1,887 million
(31 December 2021: RMB2,276 million).
Securities lending
The Group enters into securities lending transactions with the customers’ securities or deposits as
collateral. As the Group retains all the risks and rewards of such financial assets, it does not derecognize
such financial assets in the balance sheet. As at 31 December 2022, the carrying amount of securities
that have been transferred but not derecognised was RMB2,821 million (31 December 2021: RMB5,062
million).
F-411
488 HAITONG SECURITIES CO., LTD. | Annual Report 2022 (H Share)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022 (All amounts in RMB’000 unless otherwise stated)
78. AUDITORS’ REMUNERATION
2022 2021
Annual audit fee for the Company 5,566 4,906
Other subsidiaries’ audit fees 25,950 23,349
31,516 28,255
79. SUBSEQUENT EVENTS
The Company’s overseas holding subsidiary, HISGL (as borrower) entered into a facility agreement with
certain financial institutions on 24 February 2023 whereby HISGL obtained a revolving loan facility in
an amount up to HK$16 billion for a term of up to 364 days from the date of the Facility Agreement.
In connection with the Facility Agreement, the Company held the 34th meeting of the 7th board of
directors (temporary meeting) reviewed and approved Proposal on Providing Keepwell Deed for Overseas
Debt Financing of Overseas Holding Subsidiaries on 30 December 2022. The board of directors approved
that the Company provides keepwell deed measures for HISGL and its wholly-owned subsidiaries.
The keepwell deed amount will not exceed the total amount of debt financing of HK$16 billion (or
equivalent currency), and the keepwell deed period will not exceed 5 years.
On 17 March 2023, the Company, through its investee entity and HTIH, subscribed for the subordinated
perpetual securities of US$200 million issued by the HISGL. Such issuance of subordinated perpetual
securities was completed on 21 March 2023.
On 28 March 2023, HISGL has resolved to propose a rights issue of HISGL on the basis of three rights
shares for every ten existing shares, to raise share capital up to approximately HK$1.3 billion.
According to the 36th meeting of the 7th board of directors of the Company held on 30 March 2023,
the board of directors proposed to declare a dividend of RMB2.10 (tax included) per 10 shares in 2022
to all shareholders, with a total amount of RMB2,743 million (tax included) to be paid in cash. The profit
distribution proposal has yet to be deliberated and approved by the general meeting of shareholders.
Except for the above disclosures, no other material events have occurred with the Company from 31
December 2022 to the date of this report.
F-412
ISSUER GUARANTOR
Haitong International Finance Holdings Limited Haitong Securities Co., Ltd.
Kingston Chambers ( )
PO Box 173 Haitong Bund Finance Plaza
Road Town, Tortola No. 888 South Zhongshan Road
British Virgin Islands Shanghai
PRC
TRUSTEE REGISTRAR
Citicorp International Limited Citicorp International Limited
20th Floor, Citi Tower, 9th Floor, Citi Tower,
One Bay East, 83 Hoi Bun Road, One Bay East, 83 Hoi Bun Road,
Kwun Tong, Kowloon, Kwun Tong, Kowloon,
Hong Kong Hong Kong
ISSUING AND PAYING AGENT, NON-CMU PAYING CMU TRANSFER AGENT AND CALCULATION
AGENT, NON-CMU TRANSFER AGENT AGENT IN RESPECT OF CMU NOTES
AND CALCULATION AGENT IN RESPECT OF
EUROCLEAR/CLEARSTREAM NOTES
Citibank, N.A., London Branch Citicorp International Limited
Citigroup Centre, Canada Square, 9th Floor, Citi Tower,
Canary Wharf, One Bay East, 83 Hoi Bun Road,
London E14 5LB, Kwun Tong, Kowloon,
United Kingdom Hong Kong
CMU LODGING AND PAYING AGENT
Citicorp International Limited
9th Floor, Citi Tower,
One Bay East, 83 Hoi Bun Road,
Kwun Tong, Kowloon,
Hong Kong
LEGAL ADVISORS
To the Issuer and the Guarantor To the Issuer To the Issuer and the Guarantor
as to English law as to British Virgin Islands law as to PRC law
Clifford Chance Ogier Allbright Law Offices
27th Floor 11th F Central Tower 11, 12/F, Shanghai Tower
Jardine House 28 Queen’s Road Central No. 501, Yincheng Middle Road
One Connaught Place Central Shanghai 200120 PRC
Central Hong Kong
Hong Kong
LEGAL ADVISORS TO THE DEALERS
To the Dealers and the Trustee To the Dealers
as to English law as to PRC law
Linklaters Jia Yuan Law Offices
11th Floor Alexandra House F408, Ocean Plaza
18 Chater Road 158 Fuxing Men Nei Street
Hong Kong Xicheng District
Beijing, 100031, PRC
AUDITORS OF THE GUARANTOR
PricewaterhouseCoopers
22/F, Prince’s Building
Central
Hong Kong
IMPORTANT NOTICE
NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES OR TO ANY U.S. PERSON OR ANY PERSON ACTING FOR
THE ACCOUNT OR BENEFIT OF A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT OF 1993, AS AMENDED
(THE “SECURITIES ACT”)).
IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached pricing supplement (the
“Pricing Supplement”). You are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached
Pricing Supplement. In accessing the attached Pricing Supplement, you agree to be bound by the following terms and conditions, including any
modifications to them from time to time, each time you receive any information from the Issuer, the Guarantor or the Managers (each as defined in the
attached Pricing Supplement) as a result of such access. In order to review the attached Pricing Supplement or make an investment decision with respect
to the securities, you must be located outside the United States and not be a U.S. person or acting for the account or benefit of a U.S. person.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS
UNLAWFUL TO DO SO.
THE SECURITIES AND THE GUARANTEE EACH DESCRIBED IN THE PRICING SUPPLEMENT HAVE NOT BEEN, AND WILL NOT BE,
REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION
AND THE SECURITIES MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY WITHIN THE UNITED STATES, OR TO OR FOR THE
ACCOUNT OR BENEFIT OF U.S. PERSONS, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE OFFERING IS
MADE SOLELY IN OFFSHORE TRANSACTIONS PURSUANT TO THE SECURITIES ACT.
Confirmation of Your Representation: The Pricing Supplement is being sent to you at your request and by accepting the e-mail and accessing the
Pricing Supplement, you shall be deemed to represent to the Issuer, the Guarantor and the Managers that (1) you are not in the United States and are
not a U.S. person nor acting for the account or benefit of a U.S. person and, to the extent you purchase the securities described in the Pricing Supplement,
you will be doing so pursuant to Regulation S under the Securities Act; (2) the e-mail address that you gave us and to which this e-mail has been delivered
is not located in the United States, its territories or possessions; and (3) you consent to delivery of the Pricing Supplement and any amendments or
supplements thereto by electronic transmission.
You are reminded that you have accessed the Pricing Supplement on the basis that you are a person into whose possession the Pricing Supplement may
be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver or forward
this document, electronically or otherwise, to any other person. If you have gained access to this transmission contrary to the foregoing restrictions, you
are not allowed to purchase any of the securities described in the Pricing Supplement.
The Pricing Supplement has been made available to you in an electronic form. You are reminded that documents transmitted via this medium may be
altered or changed during the process of transmission and consequently none of the Issuer, the Guarantor, the Managers, the Trustee (as defined in the
Offering Circular dated 26 April 2023 (the “Offering Circular”)) and the Agents (as defined in the Offering Circular) or any of their respective directors,
officers, employees, representatives, agents, affiliates or advisers or any person who controls any of them accepts any liability or responsibility whatsoever
in respect of any discrepancies between the document distributed to you in electronic format and the hard copy version. The Managers will provide a hard
copy version to you upon request.
Restrictions: The attached Pricing Supplement is being furnished by the Issuer and the Guarantor and is exempted from registration under the Securities
Act solely for the purpose of enabling a prospective investor to consider purchasing the securities as described in the attached Pricing Supplement.
Except with respect to eligible investors in jurisdictions where such offer or invitation is permitted by law, nothing in this electronic transmission constitutes
an offer or an invitation by or on behalf of the Issuer, the Guarantor, the Managers, the Trustee or the Agents or any of their respective directors, officers,
employees, representatives, agents, affiliates or advisers or any person who controls any of them to subscribe for or purchase any of the securities
described therein, and access has been limited so that it shall not constitute in the United States or elsewhere a general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or directed selling efforts (within the meaning of Regulation S under the Securities
Act). If a jurisdiction requires that the offering be made by a licensed broker or dealer and any Manager or any affiliate of such Manager is a licensed
broker or dealer in that jurisdiction, the offering shall be deemed to be made by such Manager or such affiliate on behalf of the Issuer in such jurisdiction.
You are responsible for protecting against viruses and other destructive items. If you receive this document by e-mail, your use of this e-mail is at
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Actions that You May Not Take: If you receive this document by e-mail, you should not reply by e-mail to this electronic transmission, and you may not
purchase any securities by doing so. Any reply e-mail communications, including those you generate by using the “Reply” function on your e-mail software,
will be ignored or rejected.
YOU ACKNOWLEDGE THAT THE PRICING SUPPLEMENT AND THE INFORMATION CONTAINED THEREIN ARE STRICTLY CONFIDENTIAL AND
INTENDED FOR YOU ONLY. YOU ARE NOT AUTHORISED TO AND YOU MAY NOT DELIVER OR FORWARD THE PRICING SUPPLEMENT,
ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH PRICING SUPPLEMENT IN ANY MANNER
WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE PRICING SUPPLEMENT IN WHOLE OR IN PART IS
UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE
LAWS OF OTHER JURISDICTIONS.
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Pricing Supplement
Singapore Securities and Futures Act Product Classification – In connection with Section 309B
of the Securities and Futures Act 2001 of Singapore (the “SFA”) and the Securities and Futures
(Capital Markets Products) Regulations 2018 of Singapore (the “CMP Regulations 2018”), the
Issuer has determined, and hereby notifies all relevant persons (as defined in Section 309A(1) of
the SFA), that the Notes are “prescribed capital markets products” (as defined in the CMP
Regulations 2018).
This Pricing Supplement is for distribution to professional investors (as defined in Chapter 37 of the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong
Kong Stock Exchange”)) (“Professional Investors”) only.
Notice to Hong Kong investors: The Issuer and the Guarantor confirm that the Notes are intended
for purchase by Professional Investors only and will be listed on the Hong Kong Stock Exchange on
that basis. Accordingly, the Issuer and the Guarantor confirm that the Notes are not appropriate as
an investment for retail investors in Hong Kong. Investors should carefully consider the risks involved.
The Hong Kong Stock Exchange has not reviewed the contents of this Pricing Supplement,
other than to ensure that the prescribed form disclaimer and responsibility statements, and
a statement limiting distribution of this Pricing Supplement to Professional Investors only
have been reproduced in this Pricing Supplement. Listing of the Programme and the Notes
on the Hong Kong Stock Exchange is not to be taken as an indication of the commercial
merits or credit quality of the Programme, the Notes, the Issuer, the Guarantor or the Group
or quality of disclosure in this Pricing Supplement. Hong Kong Exchanges and Clearing Limited
and the Hong Kong Stock Exchange take no responsibility for the contents of this Pricing
Supplement, make no representation as to its accuracy or completeness and expressly disclaim any
liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of
the contents of this Pricing Supplement.
This Pricing Supplement, together with the Offering Circular (as defined below), includes particulars
given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited for the purpose of giving information with regard to the Issuer, the Guarantor
and the Group. Each of the Issuer and the Guarantor accepts full responsibility for the accuracy of
the information contained in this Pricing Supplement and confirms, having made all reasonable
enquiries, that to the best of its knowledge and belief there are no other facts the omission of which
would make any statement herein misleading.
Pricing Supplement dated 10 May 2023
Haitong International Finance Holdings Limited
(incorporated with limited liability in the British Virgin Islands)
Issue of CNY2,800,000,000 3.20 per cent. Guaranteed Notes due 2026 (the “Notes”)
Guaranteed by
Haitong Securities Co., Ltd. (海通證券股份有限公司)
(incorporated with limited liability in the People’s Republic of China)
under the U.S.$1,000,000,000 Guaranteed Medium Term Note Programme
Any person making or intending to make an offer of the Notes may only do so in circumstances in
which no obligation arises for the Issuer, the Guarantor or any Manager to publish a prospectus
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2
pursuant to either of Article 3 of Regulation (EU) 2017/1129 (as amended, the “Prospectus
Regulation”) or Section 85 of the Financial Services and Markets Act 2000 or supplement a
prospectus pursuant to either of Article 23 of the Prospectus Regulation or the Prospectus
Regulation as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018,
in each case, in relation to such offer.
This document constitutes the Pricing Supplement for the Notes described herein.
Terms used herein shall be deemed to be defined as such for the purposes of the Terms and
Conditions of the Notes (the “Conditions”) set forth in the Offering Circular dated 26 April 2023 (the
“Offering Circular”). This Pricing Supplement contains the final terms of the Notes and must be
read in conjunction with such Offering Circular. Full information on the Issuer, the Guarantor and the
offer of the Notes is only available on the basis of the combination of the Offering Circular and this
Pricing Supplement (including the Schedule included herein).
1 1(i) Issuer: Haitong International Finance Holdings Limited
(ii) Guarantor: Haitong Securities Co., Ltd. (海通證券股份有限公司)
2 2(i) Series Number: 001
(ii) Tranche Number: 001
(iii) Date on which the Notes will Not Applicable
be consolidated and form a
single Series:
3 Specified Currency or Currencies: Renminbi (“CNY”)
4 Aggregate Principal Amount:
(i) Series: CNY2,800,000,000
(ii) Tranche: CNY2,800,000,000
5 (i) Issue Price: 100.00 per cent. of the Aggregate Principal Amount
(ii) Gross proceeds: CNY2,800,000,000
6 (i) Specified Denominations: CNY1,000,000 and integral multiples of CNY10,000 in
excess thereof
(ii) Calculation Amount: CNY10,000
7 (i) Issue Date: 18 May 2023
(ii) Interest Commencement Issue Date
Date:
8 Maturity Date: Interest Payment Date falling on or nearest to 18 May
2026
9 Interest Basis: 3.20 per cent. Fixed Rate (further particulars specified
below)
10 Redemption/Payment Basis: Redemption at par
11 Change of Interest Basis or Not Applicable
Redemption/Payment Basis:
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12 Put/Call Options: Not Applicable
13 (i) Board and shareholder approvals (1) the resolutions of the board of directors of the Issuer
for issuance of Notes and Guarantee passed on 30 March 2023, (2) a resolution of the
obtained: shareholders of the Guarantor dated 21 June 2022, and
(3) a resolution of the board of directors of the Guarantor
dated 29 March 2022
(ii) Regulatory approval for issuance Enterprise Foreign Debt Pre-Issuance Registration
of Notes obtained: Certificate (企業借用外債備案登記證明)(發改辦外資備
[2023]64 號 ) dated 3 February 2023 evidencing the
registration of the issue of the Notes with the NDRC
14 Listing: Hong Kong Stock Exchange
Listing of the Notes is expected to be effective on or
around 19 May 2023
15 Method of distribution: Syndicated
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE
16 Fixed Rate Note Provisions: Applicable
(i) Rate(s) of Interest: 3.20 per cent. per annum payable semi-annually in
arrear
(ii) Interest Payment Date(s): 18 May and 18 November in each year, adjusted in
accordance with the Modified Following Business Day
Convention
(iii) Fixed Coupon Amount(s): Each Fixed Coupon Amount shall be calculated by
multiplying the product of the Rate of Interest and the
Calculation Amount by the Day Count Fraction and
rounding the resultant figure to the nearest CNY0.01,
CNY0.005 being rounded upwards
(iv) Broken Amount(s): Not Applicable
(v) Day Count Fraction: Actual/365 (Fixed)
(vi) Determination Date(s): Not Applicable
(vii) Other terms relating to the None
method of calculating interest
for Fixed Rate Notes:
17 Floating Rate Note Provisions: Not Applicable
18 Zero Coupon Note Provisions: Not Applicable
19 Dual Currency Note Provisions: Not Applicable
PROVISIONS RELATING TO REDEMPTION
20 Call Option: Not Applicable
21 Put Option: Not Applicable
22 Final Redemption Amount: CNY10,000 per Calculation Amount
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23 Early Redemption Amount (Change CNY10,100 per Calculation Amount
of Control):
24 Early Redemption Amount (No CNY10,000 per Calculation Amount
Registration Event):
25 Early Redemption Amount payable CNY10,000 per Calculation Amount
on redemption for taxation reasons
or on event of default and/or the
method of calculating the same (if
required or if different from that set
out in the Conditions):
GENERAL PROVISIONS APPLICABLE TO THE NOTES
26 Form of Notes: Registered Notes:
Global Certificate exchangeable for individual
Certificates in the limited circumstances described in
the Global Certificate
27 Additional Financial Centre(s) or Not Applicable
other special provisions relating to
payment dates:
28 Talons for future Coupons or No
Receipts to be attached to definitive
Bearer Notes (and dates on which
such Talons mature):
29 Details relating to Partly Paid Notes: Not Applicable
amount of each payment comprising
the Issue Price and date on which
each payment is to be made and
consequences of failure to pay,
including any right of the Issuer to
forfeit the Notes and interest due on
late payment:
30 Details relating to Instalment Notes: Not Applicable
31 Redenomination applicable: Not Applicable
32 Consolidation provisions: Not Applicable
33 Other terms or special conditions: Not Applicable
DISTRIBUTION
34 (i) If syndicated, names of Joint Global Coordinators, Joint Lead Managers and
Managers: Joint Bookrunners
Haitong International Securities Company Limited
Haitong Bank, Macau Branch
Bank of China Limited
BOSC International Securities Limited
China CITIC Bank International Limited
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The Hongkong and Shanghai Banking Corporation
Limited
Standard Chartered Bank
Joint Lead Managers and Joint Bookrunners
Industrial and Commercial Bank of China Limited,
Singapore Branch
Agricultural Bank of China Limited Hong Kong Branch
Bank of Communications Co., Ltd. Hong Kong Branch
BOCOM International Securities Limited
China Minsheng Banking Corp., Ltd., Hong Kong
Branch
CMBC Securities Company Limited
Industrial Bank Co., Ltd. Hong Kong Branch
SPDB International Capital Limited
Nanyang Commercial Bank, Limited
China PA Securities (Hong Kong) Company Limited
China Galaxy International Securities (Hong Kong) Co.,
Limited
CNCB (Hong Kong) Capital Limited
SMBC Nikko Securities (Hong Kong) Limited
Mizuho Securities Asia Limited
(together, the “Managers”)
(ii) Date of Subscription 10 May 2023
Agreement:
(iii) Stabilisation Manager(s) (if Any of the Managers (other than Haitong Bank, Macau
any): Branch and China CITIC Bank International Limited)
appointed and acting in its capacity as stabilisation
manager
35 If non-syndicated, name of relevant Not Applicable
Dealer:
36 U.S. Selling Restrictions: Reg. S Category 2; TEFRA not applicable
37 Additional selling restrictions: Not Applicable
38 Prohibition of Sales to EEA Retail Not Applicable
Investors:
39 Prohibition of Sales to UK Retail Not Applicable
Investors:
OPERATIONAL INFORMATION
40 ISIN: HK0000921111
41 Common Code: 262349128
42 CMU Instrument Number: CILHFN23029
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6
43 Any clearing system(s) other than Not Applicable
Euroclear, Clearstream or the CMU
and the relevant identification
number(s):
44 Legal entity identifier (LEI) of the 254900HGXUILEFY9XQ36
Issuer:
45 Delivery: Delivery against payment
46 Additional Paying Agent(s) (if any): Not Applicable
47 The aggregate principal amount of U.S.$404,046,234.43
Notes issued has been translated
into U.S. dollars at the rate of
CNY6.9299 = U.S.$1.00, producing
a sum of (for Notes not denominated
in U.S. dollars):
48 Rating(s): The Notes to be issued are expected to be rated:
S&P: BBB
HONG KONG SFC CODE OF CONDUCT
49 Rebates Not Applicable
50 Contact email addresses where project.bund.2023@htisec.com
underlying investor information in BOSCI_DCM@boscinternational.com
relation to omnibus orders should be TMG_Syndicate@cncbinternational.com
sent: SYNHK@SC.COM
xizi.chen@sg.icbc.com.cn
shuhong.ye@sg.icbc.com.cn
dcm@bankcomm.com.hk
dcm@cmbccap.com
johnnylee@ncb.com.hk
jlee2866@bloomberg.net
leatan@ncb.com.hk
ltan325@bloomberg.net
jameschan@ncb.com.hk
jameschan8@bloomberg.net
lawrenceliao@ncb.com.hk
jliao129@bloomberg.net
dcm@pingan.com.cn
dcm@chinastock.com.hk
MizuhoGC_Execution@hk.mizuho-sc.com
STABILISATION
In connection with the issue of the Notes, any of the Managers named as Stabilisation Manager in
this Pricing Supplement (or persons acting on behalf of any Stabilisation Manager(s)) may over-allot
Notes or effect transactions with a view to supporting the market price of the Notes at a level higher
than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any
stabilisation action may begin on or after the date on which adequate public disclosure of the terms
A50736991
7
of the offer of the Notes is made and, if begun, may cease at any time, but it must end no later than
the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of
the Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation
Manager(s) (or person(s) acting on behalf of any Stabilisation Manager(s)) in accordance with all
applicable laws and rules.
LISTING APPLICATION
This Pricing Supplement comprises the final terms required for the issue of Notes described herein
pursuant to the U.S.$1,000,000,000 Guaranteed Medium Term Note Programme of Haitong
International Finance Holdings Limited.
RESPONSIBILITY
The Issuer and the Guarantor accept responsibility for the information contained in this Pricing
Supplement.
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8
Signed on behalf of the Issuer
HAITONG INTERNATIONAL FINANCE HOLDINGS LIMITED
By: (S.D.)
Duly authorised
Signature Page – Project Bund – Pricing Supplement
Signed on behalf of the Guarantor
HAITONG SECURITIES CO., LTD.
(海通證券股份有限公司)
(S.D.)
By:
Duly authorised
Signature Page – Project Bund – Pricing Supplement
SCHEDULE
The Offering Circular is hereby supplemented with the following information, which shall be deemed
to be incorporated in, and to form part of, the Offering Circular. Save as otherwise defined herein,
terms defined in the Offering Circular have the same meaning when used in this schedule.
The First Quarterly Report for the Year 2023
The Guarantor has published the Group’s first quarterly report for the first quarter ended 31 March
2023 (the "March 2023 Financial Information"), financial information in which was prepared
according to the Generally Accepted Accounting Principles of the PRC. The report is available on
the website of the Hong Kong Stock Exchange at www.hkexnews.hk and the website of the
Guarantor at www.htsec.com.
The Group’s March 2023 Financial Information is not included in and does not form a part of the
Offering Circular. The Group’s March 2023 Financial Information has not been audited or reviewed
by the Group’s independent accountants, or any other independent accountants and may be subject
to adjustments if audited and reviewed. Consequently, none of the Managers, the Trustee or any
Agent (or any of their respective affiliates, directors, employees, agents, representatives, officers or
advisers or any person who controls any of them) makes any representation or warranty, express or
implied, regarding the accuracy of such financial information or their sufficiency for an assessment
of, and potential investors must exercise caution when using such data to evaluate, the Group’s
financial condition, results of operations and results. The Group’s March 2023 Financial Information
should not be taken as an indication of the expected financial condition, results of operations and
results of the Group for the full financial year ending 31 December 2023.
As at 31 March 2023 compared with 31 December 2022, the Group’s derivative financial assets
decreased mainly due to a decrease in derivative financial assets; the Group’s financial assets held
under resale agreements increased mainly due to an increase in financial assets held under resale
agreements; the Group’s placements from banks and other financial institutions increased mainly
due to an increase in placements from banks and other financial institutions; the Group’s derivative
financial liabilities decreased mainly due to a decrease in derivative financial liabilities; the Group’s
funds payable to securities issuers increased significantly mainly due to an increase in funds payable
to securities issuers; the Group’s taxes payable decreased mainly due to a decrease in enterprise
income tax payable; and the Group’s accounts payable increased mainly due to an increase in
settlement payables.
For the three months ended 31 March 2023 compared to the same period in 2022, the Group’s
operating income increased mainly due to an increase in revenue including investment income,
gains from fair value changes and other operating income; the Group’s net fee and commission
income decreased mainly due to a decrease in fee income of investment banking business and
brokerage business; the Group’s net interest income decreased mainly due to an increase in interest
expenses; the Group’s investment income increased mainly due to an increase in investment
income from financial instruments; the Group’s gains from changes in fair value increased mainly
due to an increase in the gains from changes in fair value; the Group’s other operating income
increased significantly mainly due to an increase in the sales revenue of a subsidiary; the Group’s
business and management expenses increased mainly due to an increase in labour costs and
investment in science and technology; the Group’s credit impairment losses increased significantly
mainly due to an increase in the impairment losses on financial assets held under resale agreements;
the Group’s other operating cost increased significantly mainly due to an increase in the cost of sales
of a subsidiary; and the Group’s income tax expense increased significantly mainly due to an
increase in taxable income.
For the three months ended 31 March 2023, the Group recognised net cash outflow from operating
activities (while the Group recognised net cash inflow from operating activities for the same period
in 2022) mainly due to a decrease in cash flow from operating activities.
